Lehman plunge not driven by credit risks-Hintz

NEW YORK (Reuters) - Lehman Brothers Holdings Inc LEH.N shares on Tuesday plummeted nearly 40 percent to a decade low, but Sanford C. Bernstein analyst Brad Hintz contends the moves do not suggest any credit or counterparty risks at the embattled investment bank.

In midafternoon trading, Lehman shares were down by $5.61, or 39.6 percent, at $8.54 with more than 30.2 million shares changing hands. The stock fell to its lowest level since the depths of the 1998 Asian debt crisis, when Lehman was buffeted by questions about its financial strength.

Hintz, however, continues to rate Lehman shares as "market perform" and told clients that while there is widespread anxiety about Lehman's asset losses and ability to raise needed capital, the U.S. government will not let Lehman collapse.

"Let's recognize that the Federal Reserve is supporting the funding of four 'surviving' large capitalization brokers, so the sharp decline in Lehman stock today is an 'equity issue,' not a credit or counterparty issue," he wrote.

The Fed, which stepped in to keep Bear Stearns from failing in March, does not want to risk "an avalanche of unquantifiable systemic risk" triggered by a Lehman failure, said Hintz. Since March the Fed has provided primary dealers, including Lehman, access to credit from its discount window.

Hintz observed that Lehman shares came under pressure as investors noticed that the bank had stopped issuing bonds off a shelf registration. That only added to the uncertainty surrounding the bank.

"We believe this move is a sign that the company has some material nonpublic information that the firm doesn't want to disclose in a bond prospectus," Hintz said.

Lehman, Hintz added, on Monday announced it would report third-quarter earnings as well as "key strategic initiatives" next week.

(Reporting by Joseph A. Giannone; Editing by Brian Moss)