Failed American investment bank Lehman Brothers, voted the best in the business many times, is rumoured to have made a distress call to Warren Buffett to rescue it, but the legendary investor politely hung up as he did not see good returns.
Days before filing for bankruptcy protection from its creditors to whom it owes over $600 billion, Lehman Brothers wrote to Buffett for help, according to a mail currently doing the rounds on the Internet through blogs and forwarded e-mails.
Buffett, the world's richest person with over $60 billion of net worth, is said to have replied: "Thank you for your recent letter for my company to invest some funds into Lehman Brothers. . . Unfortunately, I do not see good return on my money if I invest into your company."
Although its authenticity is yet to be proven, the mail has Lehman CEO Richard Fuld's name as the sender, while the reply carries the name of Buffett.
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- Lehman Brothers' bankruptcy filing document
"Lehman's books are bleeding. The stock is a falling knife. You are peddling your crown jewel, cash cow, money management division at the wrong time to get market value," Buffett's reply says further.
In his request to Buffett, Fuld says, "I firmly believe that an investment in Lehman Brothers by Berkshire Hathaway is a classic opportunity for your great company to, once again, buy a fabulous global franchise at a very fair price."
Fuld further says, "Over the past year, our firm's market capitaliszation has shrunk by more than $30 billion (about 75 per cent). All of the shareholder wealth that we've created over the past 10 years has been completely erased in a matter of months, and yet our firm has never had brighter opportunities nor a stronger safety net."
"This is the investment opportunity that we see for you and the rest of the Berkshire family. You have the opportunity to invest in the brokerage industry at prices not seen for a decade," Fuld says in the e-mail.
"Our firm is poised to return to greatness, and many of Bear's clients are coming our way," he goes on to say.
Bear Stearns was one of first major casualties in the ongoing crisis in the American financial market and was eventually purchased by JPMorgan.
According to reports, Buffett has also been approached by AIG, which is also on the brink of bankruptcy, for sale of some of its units. Prior to its collapse, Lehman Brothers is also said to have approached Barclays and Bank of America, which on Monday bought over another distressed financial major Merrill Lynch in a no-cash $50 billion deal.
Reports from the United States said that AIG was in discussions with Buffett over the weekend and was negotiating sale of its aircraft leasing business. As Berkshire also owns some large insurance businesses, the core insurance business of AIG could also have been discussed for a distress sale.
The Wall Street and the authorities in the US are said to be currently working on a rescue plan for AIG with firms like Goldman Sachs and JPMorgan, while names of Washington Mutual and Wachovia are also emerging as next distress candidates.
Earlier this year, Buffett had said a financial crisis reveals who have been 'swimming naked' and it has now emerged 'Wall Street has been king of a nudist beach.'
In the midst of the subprime crisis, Buffett said during a media interview in June that he sees investment opportunities in the subprime market. He has been known to make investments in some of the most beaten-down industries, which has further added fuel to rumours about him picking up some investments from the debris of the current financial turmoil.
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