By Zachary R. Mider
Sept. 24 (Bloomberg) -- More ``major'' financial companies will collapse or lose their independence before the global credit crisis ends, said Lazard Ltd.'s Gary Parr, who's advised Bear Stearns Cos., Fannie Mae and Lehman Brothers Holdings Inc. this year.
``Ratings agencies continue to downgrade financial institutions very aggressively,'' Parr, 52, said at a Foreign Policy Association conference in New York today. ``That is going to create problems, capital-raising needs, and more bankruptcies. Major institutions will be taken over. They will have to be.''
The U.S. government took control of Fannie Mae, Freddie Mac, andAmerican International Group Inc. in the last three weeks to prevent them from collapsing. Lehman filed for bankruptcy, and Merrill Lynch & Co. agreed to sell itself to Bank of America Corp. Bear Stearns agreed to sell itself to JPMorgan Chase & Co. in March to avoid a bankruptcy filing.
``I sometimes feel a bit like the paramedic, running from one problem to another,'' Parr said. Three days before Bear Stearns agreed to the JPMorgan sale, the firm asked Parr to find buyers for some or all of the company, according to a regulatory filing. Parr helped negotiate with JPMorgan and another potential buyer, earning Lazard a $20 million fee.
Bear Stearns and Fannie Mae are some of the biggest casualties of a yearlong credit contraction sparked by rising defaults on U.S. mortgages. Banks and securities firms have had credit losses and writedowns of more than $500 billion. U.S. Treasury Secretary Henry Paulson is pushing a $700 billion rescue fund to remove devalued assets from the financial system.
`Where Are We?'
``One question that's posed frequently is, `Where are we in this crisis?''' Parr said. ``I can only observe we are in the middle and there are sizable losses still to come.''
Parr, a Lazard deputy chairman, is a veteran adviser to financial companies. He represented the Kuwait Investment Authority on its investment inCitigroup Inc. and China Investment Corp. on buying a stake in Morgan Stanley.
The crisis has pushed Goldman Sachs Group Inc. and Morgan Stanley, formerly the biggest U.S. securities firms, to transform into commercial banks and to raise capital to restore market confidence. Goldman raised $5 billion from a public offering and the same amount from billionaire investorWarren Buffett's Berkshire Hathaway Inc.
``There are financial institutions that now can be identified as being cleaner, more distant from the problem,'' such as Goldman Sachs, Parr said. ``Someone as smart as Warren Buffett takes a view that this is a survivor. They know how to manage the risks.''
To contact the reporter on this story: Zachary R. Mider in New York atzmider1@bloomberg.net
Last Updated: September 24, 2008 15:55 EDT--~--~---------~--~----~------------~-------~--~----~
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