Lehman Brothers Holdings Inc. on Monday said it will raise $6 billion in new capital to shore up its balance sheet after saying it expects to post an unexpectedly large second-quarter loss of nearly $3 billion.
Shares of the nation's fourth largest investment bank tumbled 12 percent in premarket trading after closing at $32.29 on Friday.
Lehman expects to lose $2.8 billion, or $5.14 per share, for the period ended May 31. This compares to a profit of $1.3 billion, or $2.21 per share, in the year-ago period.
This marks the first loss for Lehman Brothers since it was spun off from American Express Co. in 1994. Lehman becomes the latest financial institution to show continued pain from the global credit crisis. Analysts had expected the company to report a loss of just 22 cents per share for the period, according to Thomson Financial.
Richard Fuld, Lehman's chief executive, said he was "very disappointed" in the quarterly results. However, he believes the additional capital — raised through an offering to yet unnamed investors — will help keep the company whole amid continued market turmoil.
"Notwithstanding the solid underlying performance of our client franchise, we had our first-ever quarterly loss as a public company," Fuld said in a statement.
Lehman Brothers, which plans to release full details of its quarterly results on June 16, said revenue during the quarter suffered from "negative mark to market adjustments and principal trading losses." Like other investment banks, Lehman has been forced to write down the value of investments in mortgage-backed securities that have suffered in the past year.
In addition, the company also said it also lost money during the quarter because of hedging losses.