LEHMAN's BANKRUPTCY EXPOSURE HITS OFFICE-MAX

[Anonymous]

http://www.ft.com/cms/s/0/e697c71e-869a-11dd-959e-0000779fd18c.html
Lehman exposure hits OfficeMax
OfficeMax,
the US office supplies retailer, saw its shares fall over 16 per cent
on Friday after it reported that it was exposed to risk from the Lehman
Brothers bankruptcy.The sharp drop in its share price came against the
background of a rising market, and contrasted with the relatively
stable share performance of major retailers and consumer goods
companies during the past week.

The slump followed a regulatory
filing made late on Thursday, in which OfficeMax said it “could suffer
adverse consequences” because of Lehman’s involvement in the financing
of $735m of its bond debt. OfficeMax issued the debt after it spun off
its timber assets to Boise Land & Timber in 2004, receiving $1.6bn
in instalment bonds issued by Boise that were in turn guaranteed in
part by collateral notes issued by Lehman Brothers.

It said
Lehman Brothers’ bankruptcy filing had now prompted “an event of
default” on the instalment notes, while adding that there had been no
actual payment default to date on the instalment notes. It said there
was also no determination that the value of the instalment notes had
been affected.

Stephen Chick, a retail analyst at FBR Capital
Markets, argued in a note to clients on Friday that a default could
significantly increase Office Max’s interest payments. He downgraded
OfficeMax and cut his price target on the stock to $12 from $18,
calling the implications of the company’s Lehman connections
”uncertain”.OfficeMax’s shares closed at $11.11, having fallen from a
high of $34 last year.

[Author]

September 23, 2008 at 10:53 AM