NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N), Morgan Stanley (MS.N) and other banks said Tuesday they are still trading with embattled Lehman Brothers Holdings Inc LEH.N, helping counter speculation Wall Street firms were limiting their exposure to Lehman’s credit woes and plunging stock price.
“Goldman is a willing counterparty to Lehman across all our businesses,” spokesman Michael DuVally told Reuters.
“Morgan Stanley continues to trade as usual with Lehman Brothers,” spokesman Mark Lake said.
Spokesman at Credit Suisse AG CSGN.VX and Citigroup Inc (C.N) also said they continued to trade with Lehman across all their businesses.
The statements indicated Lehman’s trading partners would continue to do business. That sent shares of Lehman rising 3.7 percent in late electronic trading.
Lehman’s stock had plummeted 45 percent to its lowest price since the 1998 Asian debt crisis as investors worried the No. 4 investment bank was struggling to raise the capital it needs to offset losses on hard hit mortgage and other assets.
Analysts estimate Lehman in its third-quarter results could write down the value of its assets by more than $4 billion.
Investors demonstrated the extent of their worries by bidding up the price of Lehman credit default swaps by 50 percent, fueled by news that takeover talks with Korean Development Bank had broken down.
Five-year CDS on Lehman Brothers traded at 490 basis points — or $490,000 a year to protect $10 million of debt. The price widened by 163 basis points on the day, according to John Atkins, an analyst at IDEAglobal in New York.
KDB in recent weeks has emerged as the most-likely savior for Lehman, which has been scrambling to either sell the company, sell its money management arm or shed a big block of distressed assets.
Additional reporting by Dena Aubin and Jon Stempel; editing by Jeffrey Benkoe