Lehman Brothers: Time is Up!

It appears at this point that the Lehman situation is going to hit a climax next week. There are so many questions that surround this entity and I believe the management team is in full gear to get the firm sold (or infused with fresh capital) before next week's conference call.

UPDATE: The conference call took place about 6 hours after this post. I will spend some time reviewing the call and examining the data in their release.

If you are interested in doing some homework before the call and the earnings release next week then I would recommend you review the following:

Lehman Brothers May 2008 10-Q
Be sure to pay attention to their discussion of the Level 3 assets on Page 29.

Lehman Brothers June 2008 Conference Call Transcript
Review the questions asked by Mike Mayo from Deutsche Bank - he really pressed them last time

Lehman Brother Financial Supplement from Last Quarter
You will want to reference Attachment II

Also, if you have a Merrill Lynch account be sure to spend a few minutes reading Guy Moszkowski's comments about the Lehman. Guy is a very good analyst but I would be willing to be that Lehman's results will be far worse than what he is currently predicting. (I will discuss this topic later this week)

In preparation for the Lehman call, I have put together a number of questions that I think would give us a clear view of Lehman's financial condition. The questions are as follows:

1. How much of their commercial related positions did they end up writing off for this quarter? They had roughly $30 billion on the books according to Attachment II of the financial supplement they provided investors last quarter.

2. What is the status of the undeveloped SunCal investment? How much more of a writedown did they take on that asset? I believe they had only taken about a $700M gross writedown last quarter.

3. Where do the Level 3 assets sit at this point? Their last 10-Q had it sitting at $38 billion. Let's hope for the sake of shareholders they were able to trim this down.

4. Are they still investigating the "Good Bank/Bad Bank" Model? Note: of course, this strategy could allow the firm to shed toxic assets however there are two real problems with this setup: (1) it will be tough to find a good manager to run it knowing that its a train wreck and (2) they will need to find financing for the new entity - which I would think might be very tough at the moment.

5. Will they give us more disclosure on the whole loans? The mezzanine side of the whole loans could give us clarity on more issues awaiting to surface.

6. Did they make any transfers/sales/negotiations with R3 Capital Partners? If so, please elaborate.

7. Where are they at with Neuberger? If they sell Neuberger, is there any expectation that they might compromise their credit rating which could also trigger another host of credit-related issues.

8. What are their thoughts on the S&P CreditWatch "negative" implication slapped on the firm this week?

I intend to add more questions to my list plus make a few predictions. Please stay tuned.

Thanks for reading.