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 user 2008-09-23 at 10:53:04 am Views: 48
  • #20397

    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.