Lehman Brothers may be the next to take a hit

Lehman Brothers has so far navigated the sub-prime morass pretty well.  But the Wall Street Journal "Heard on the Street" column notes that the company may be in for a bumpy quarter with a possible $1.3 billionish write down:

In recent weeks, credit markets have worsened, and Lehman believes it is now facing a write-down in the $1.3 billion range, according to people familiar with the matter. That has risen from a recent estimate of $800 million to $1 billion, and from a $830 million write-down in the fourth quarter.....

Lehman, one of Wall Street's major bond firms, for years did a big business originating mortgages and then packaging and selling them to investors. Lehman has prided itself on its ability to shift assets off the firm's balance sheet. But as current markets deteriorate, the brokerage finds itself with more than $90 billion of debt securities and loans that are potentially vulnerable to markdowns. The firm reports first-quarter earnings in mid-March.

Nearly $39 billion of those holdings are commercial real-estate loans. Even as it cut way back on making home loans, Lehman continued to lend to buyers of office buildings and other assets. In the fourth quarter of fiscal 2007, ended Nov. 30, Lehman originated $15 billion of commercial mortgages, in line with the average origination in the previous three quarters.

Yet, the firm only sold off $1.5 billion of those loans, compared with more than $10 billion in the third quarter. As a result, its commercial-mortgage holdings have swelled. Now, analysts wonder how much they will have to be marked down....

Now, Lehman Gets Pelted - Wall Street Journal (Heard on the Street)