Lehman files for bankruptcy, in advanced talks to sell private equity real estate arm

Lehman Brothers has filed for Chapter 11 bankruptcy protection after failing to find a buyer over the weekend. The failed bank says it is in advanced discussions with a 'number' of potential buyers for its investment management unit, which includes Lehman Brothers Real Estate.

US investment bank Lehman Brothers still intends to sell its private equity and real estate operations, despite having filed for bankruptcy protection following an unsuccessful attempt to find a buyer.

In a statement this afternoon, Lehman said it was in advanced discussions with number of potential purchasers for its investment management division, which owns the private equity real estate platform. That platform appears to be in good health having raised $3.2 billion for Lehman Brothers Real Estate Partners III only last month. The private equity real estate business is headed by Brett Bossung and Mark Newman and employs 54 people.

However after saying last week it would consider selling a 55 percent stake in its highly-prized asset management unit, Neuberger Berman, Lehman said today the unit would be spun-out as a separate entity and would “not be subject to the bankruptcy case” of Lehman.

The statement added that it was “business as usual” at Neuberger with its “portfolio management, research and operating functions remain[ing] intact.” Lehman said its other business, including Lehman Brothers International (Europe), Lehman Brothers Holdings Plc, Lehman Brothers Limited and LB UK RE Holdings, would also be placed into administration.

Lehman's decision to file for Chapter 11 bankruptcy protection comes after failing to find a buyer over the weekend. UK bank Barclays and US bank Bank of America reportedly walked away from talks to buy Lehman after the Federal Reserve refused to provide guarantees of the bank’s liabilities as it did for Bear Stearns.

Last week the bank – which is the highest profile victim of the credit crunch – received a cool reception on Wall Street when it outlined a package of measures designed to save itself. Reporting third quarter losses of $3.9 billion, the bank said as well as the sale of a 55 percent stake in the investment management arm, it would spin off its $30 billion (€21.4 billion) commercial real estate operation into a separate public company called Real Estate Investments Global (REI Global). Lehman also said it expected to close a $4 billion deal with asset management giant BlackRock Financial Management in the next few weeks for part of its UK residential mortgage portfolio.