Lehman raises $6 bln, expects big 2nd-quarter loss

By Dan Wilchins

NEW YORK (Reuters) - Lehman Brothers Holdings Inc on Monday raised $6 billion in capital and projected a worse-than-forecasted quarterly loss, sending its shares swooning to a new five-year low.

Lehman's expected $2.77 billion quarterly loss -- the first in its history as a public company -- also knocked rival investment bank stocks lower, as confidence faded in a quick end to credit crunch-related pain.

Lehman, which blamed the projected loss on $3.7 billion of write-downs from trades and hedges gone sour, said it is now hoping to put investors' questions about its capital to rest and focus on the future.

"We raised a boatload of capital today. We've got to get down to performing now ... That's where our emphasis is going to be," CFO Erin Callan told Reuters.

Callan said on a conference call that the bank's share offerings on Monday were "substantially oversubscribed."

But critics said the bank had been inconsistent with its message and still had more work to do.

"They raised billions of dollars they said they didn't need to replace losses they said they didn't have," said David Einhorn of hedge fund Greenlight Capital, who is shorting Lehman shares in a bet they will decline.

Einhorn told Reuters Lehman is still carrying too much risk on its balance sheet.

Investors have become increasingly skittish about Lehman's health in recent months after the global credit crisis triggered a run on the bank at Bear Stearns Cos in March. Bear Stearns sold itself at a fire sale price to JPMorgan Chase & Co last month.

With Lehman having access to short-term funding at the Federal Reserve and having billions of dollars of assets at its disposal, a run on the bank is seen as unlikely.

But market difficulty and maintaining higher capital levels will likely constrain Lehman's profitability, particularly given the cloudy outlook for many financial markets, analysts said.

Matt McCormick, an analyst at Bahl & Gaynor Investment Counsel in Cincinnati, said, "They're going to have to find ways to assuage concerns there aren't more write-downs coming."

The fourth-largest U.S. investment bank has taken steps to shore up its capital base this year. The $6 billion of capital raised Monday follows a $4 billion convertible preferred share offering in the beginning of April and a $1.9 billion preferred share offering in February.

Both the New Jersey Division of Investment and former American International Group Chief Executive Maurice "Hank" Greenberg said they bought shares.

Chief Executive Richard Fuld said in a statement that he was "very disappointed" in the quarter's results, which are set to be reported on June 16 and are still subject to adjustment.