Lehman Expects to Win State Bond Sale Deal

Lehman Bros. Holdings Inc., the fifth-largest underwriter of municipal debt, said it expected to be named manager of California’s proposed $15-billion bond sale, a record offering that could generate the firm $44 million in fees.

Peter Taylor, managing director of Lehman’s Los Angeles office, said Lehman probably would trump Citigroup Inc., UBS and Merrill Lynch & Co. because his firm, the fourth-biggest U.S. brokerage, would be able to arrange the sale faster.

That’s because Lehman has spent almost six months working on a $10.7-billion bond sale that has been delayed, Taylor said.

“We’d expect that, to make it easier,” Lehman will manage the $15-billion sale, said Taylor, whose firm managed $24.5 billion of municipal debt last year, according to Thomson Financial. “There’s a fair amount of work we have done that can be applied. They are essentially the same purpose.”

Lehman was hired for the $10.7-billion sale by California State Treasurer Phil Angelides, a Democrat who now opposes the $15-billion offering. The state needs the money to repay $14 billion in warrants due in June. If Tuesday’s vote fails, the state may need to cut $11 billion from spending next year in addition to $5 billion in cuts already proposed.

The sale would help Lehman boost its standing as an underwriter of municipal debt. Last year, the firm trailed Citigroup, UBS and Merrill Lynch.