Blackstone, KKR eye Lehman assets: sources

LONDON (Reuters) - Blackstone Group LP and Kohlberg Kravis Roberts & Co are each looking to buy parts of Lehman’s real estate and asset management units, sources familiar with the situation said on Friday, sparking a broad rebound in financial stocks.

The exterior of the world headquarters for Lehman Brothers is seen in New York, June 17, 2008. REUTERS/Shannon Stapleton

The real estate unit of Lehman Brothers Holdings Inc, which includes property and some asset-backed securities, could be worth about $5 billion, the sources said.

Lehman shares jumped 5.3 percent after the Reuters report. That helped lift the S&P financial index, which had slipped earlier on Friday, by 1.8 percent.

“Lehman has been so shredded in terms of confidence that anything like this is something that can ignite a upward movement at any point,” said Michael Holland, founder of money manager Holland & Co LLC.

Blackstone, KKR, and Lehman all declined to comment.

Lehman, the fourth-biggest U.S. investment bank, is under pressure to raise capital ahead of its earnings announcement this month. It has racked up crippling losses and still bears more than $60 billion of mortgage and commercial real estate exposure.

It has explored shedding assets, spinning off its money management arm and selling a significant stake to outside investors.

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State-controlled Korea Development Bank (KDB) is in talks to acquire or invest in Lehman, but any deal was thrown into doubt amid financial market turmoil this week in South Korea. KDB has not given any details on the negotiations.

Blackstone, owner of the Hilton hotels chain, has invested in real estate in the past, and the unit contributes about one-third of its income -- about the same as its private equity unit.

Lehman is expected to post another big quarterly loss. The bank has already taken $7 billion in credit-related write-downs and losses since the start of the global credit crisis.

The bank has also raised about $12 billion in capital this year through common equity, preferred stock and convertible securities offerings, but analysts and fund managers say this may not be enough.

Jeff Harte, an analyst at Sandler O’Neill, said in a research note he would prefer that Lehman retain asset management, “but time is not on management’s side.”

“A sale may prove a necessary evil to shore up the balance sheet,” Harte wrote Friday, adding that Lehman’s asset management unit is worth about $8 billion.

Lehman shares led all broker-dealers on the New York Stock Exchange, up 80 cents at $15.97. Blackstone shares were off 22 cents, or 1.3 percent, at $16.52.

Additional reporting by Paritosh Bansal and Jonathan Spicer in New York; Editing by Jeffrey Benkoe and Braden Reddall