How To Fix Lehman Bros.

Lehman Brothers must raise capital, sell as much as $50 billion in distressed debt securities, and cut its dividend by 90%, among other moves, to calm the markets deep concern over its liquidity problems, says Ladenburg Thalmann & Co. analyst Richard Bove in a research note.

An asset sale could also involve Lehman spinning off 20% of the asset management company Neuberger Berman. Bove assumes Neuberger earns $1 billion in pretax and is worth 20 times post tax earnings. Thus, the firm by his calculations has a value of $13 bllion.

“My sense is that Lehman feels a need to take action now to stop, for once and, hopefully, for all, the constant stories and rumors swirling around the company,” Bove, who rates Lehman shares neutral, wrote. “It is now possible that clients are thinking about their long term relationship with the company because the stories will not die. These clients are becoming increasingly unwilling to make commitments for more than short-term activities. Lehman must, therefore, act to solidify existing customer relationships.”