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 user 2008-09-23 at 10:53:38 am Views: 77
  • #20836

    Lehman exposure hits 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.