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MAHARSHI DAYANAND

COLLEGE OF ARTS,
SCIENCE, COMMERCE
PAREL MUMBAI 400012

PROJECT ON
LEHMAN
BROTHERS
BANKCRUPTCY

SUBMITTED BY,
SR.
NO.

NAME

ROLL
NO.

01

BHOSALE YOGESH

04

02

BHOSLE SNEHAL

05

03

CHOUHAN NEHA

06

04

JAIN SEJAL

22

05

MEHTA MAULIK

38

06

RESHAMWALA NEHA

50

INTRODUCTION
Lehman Brothers Holdings Inc, the fourth largest
US investment bank, succumbed to the sub prime
mortgage crisis in the biggest bankruptcy filing in
history.
Their principal businesses include investment
banking, capital markets and investment
management.
Serves institutional, corporate, government and
high net worth individual clients.

BACKGROUND OF LEHMAN
BROTHERS

Founded in 1858 by Three brothers


HENRY, EMANUEL and MAYER LEHMAN,
and hence the name LEHMAN BROTHERS

Their first business involved trading cotton


for cash and other merchandise.
The journey was not a smooth one, they
faced a lot of hardships during the civil war
and the great depression.
They gradually moved on to financial
advisory.

CAUSES OF THEIR LOSSES


In August 2007, the firm closed its subprime lender,
BNC Mortgage, eliminating 1,200 positions in 23
locations, and took an after-tax charge of $25 million and
a $27 million reduction in goodwill.
In 2008, Lehman faced an unprecedented loss to the
continuing subprime mortgage crisis.
Investor confidence continued to erode as Lehman's
stock lost roughly half its value and pushed the S&P 500
down 3.4% on September 9. The Dow Jones lost 300
points the same day on investors' concerns about the
security
of the
bank.
The next
day,
Lehman announced a loss of $3.9 billion
and their intent to sell off a majority stake in their
investment-management business, which includes
Neuberger Berman.

On September 20, 2008, a revised proposal to sell the


brokerage part of Lehman Brothers holdings of the deal,
was put before the bankruptcy court, with a $1.35 billion
(700 million) plan for Barclays to acquire the core
business of Lehman Brothers (mainly Lehman's $960
million Midtown Manhattan office skyscraper), was
approved.
On September 22, 2008, Nomura Holdings, Inc.
announced it agreed to acquire Lehman Brothers'
franchise in the Asia Pacific region including Japan, Hong
Kong and Australia.
US stocks tumbled, more than $300 billion in market
value, pummeled by the developments. Lehman plunged
95%; AIG retreated 42% on funding concerns while Bank
of America Corp slumped 14% after agreeing to buy
Merrill Lynch & Co. for $50 billion.

Stocks fell across Europe & Asia the dollar lost the most
against the yen in a decade & treasuries surged.

The Dow Jones Industrial Average sank 300.20 to


11121.79. Seven stocks slipped for each that rose on the
New York Stock Exchange.

The Dow Jones closed down just over 500 points on


September 15, 2008, at the time the largest drop by
points in a single day since the days following the attacks
on September 11, 2001.

BANKRUPTCY

Lehman Brothers filed for Chapter 11


bankruptcy protection on September 15,
2008.
LEHMAN
BROTHERS
NEWYORK CITY
HEAD QTRS.

IMPACT ON U. S. MARKET
The Dow Jones closed down just over 500 points on
September 15, 2008, at the time the largest drop by
points in a single day since the days following the attacks
on September 11, 2001.
Lehman's bankruptcy real estate.
Putnam Investments, a unit of Canada's Great-West
Lifeco, shut a $12.3 billion money-market fund as it faced
"significant redemption pressure" on September 17, 2008.
Politically this expected to cause some depreciation in
the price of commercial e bankruptcy proved of influence
on the 2008 United States Presidential Election, for the
day after Barack Obama.

WORLD - WIDE IMPACT


The prospect for Lehman's $4.3 billion in mortgage
securities getting liquidated sparked a selloff in the
commercial mortgage-backed securities (CMBS) market.
Several money-market funds and institutional cash
funds had significant exposure to Lehman were also
sufferring from great losses.
In Japan, banks and insurers announced a combined
249 billion yen ($2.4 billion) in potential losses tied to the
collapse of Lehman.
In Hong Kong more than 40,000 individuals in the city
have invested in HK$12.7 billion of "guaranteed minibonds" from Lehman.
The default of Lehman Brothers was a low probability
event, which was totally unexpected.

IMPACT ON
INDIAN MARKETS !!!
LEHMANS
INDIAN
INVESTMENTS
The 158 year
old Lehman
Brothers move to

file for bankruptcy

wiped off
more thanRs2000crore from the market valuation of those Indian
companies
in which the US financial major made equity investments.

IT SECTOR
The meltdown in US had a huge impact on Indian IT & IT
companies as a large chunk of their revenues is from US.
The slowdown also had an impact on the hiring practices of Indian
IT services companies, who had to now focus on just-in-time hiring,
rather than advanced hiring practices like campus recruitment.

IMPACT ON
INDIAN MARKETS !!!
REAL ESTATE
Many leading realtors, already facing a paucity of funds
due to a slowdown or a correction in prices, found it more
difficult to raise resources even at the project level.

BANKS
ICICI Bank said that it might need to make an additional
provision of $28 million (Rs.188 crore) on its exposure to
bonds issued by Lehman. It had already made provisions
of $12 million on these bonds.

CONCLUSION

ncial crises are terrifying when underlying economic fundamentals


of line with established theory, leading to bursts of unjustified optim
or pessimism. It is the responsibility of the powers that be to bring
e to the market. Every financial crisis is different, but they do all e
Lehman Brothers bankruptcy and Merrill Lynchs acquisition by
of America is yet another stage in the progression of the financia
had its roots in the US sub-prime mortgage market.
The Lehman bankruptcy had a great impact on INDIA. The
undercapitalization of financial houses that was at the core of
the financial meltdown in the US & developed markets became
a problem in Indian Financial System, too.

THANK YOU