Friday, April 17, 2009
Yellowcake
When it comes to toxic assets, Lehman Brothers has got everyone beat on Wall Street. Thanks to a commodities trading contract from before it went bankrupt, Lehman is sitting on half a million pounds of uranium “yellowcake”—enough material to power a nuclear reactor for about a year, but not quite enough to build a nuclear weapon. Lehman, once the fourth-largest investment bank, tried to sell off the yellowcake shortly after it filed for bankruptcy protection, but gave up after it felt buyers were low-balling them. One analyst said the bank went about the sale the wrong way, as it tried to unload the radioactive material all at once, and that move caused the market price to fall.
Based on the current price uranium is trading for ($40.50 a pound), Lehman could fetch $20 million for its yellowcake, which won’t put much of a dent in the $200 billion of unsecured liabilities it has to pay off. But instead of selling off the uranium in one lump sum, the bank has adopted a new strategy of gradually selling the material over the next two years. “We are not dumping this on the market and have no fire-sale mentality,” said one Lehman official.
-Noel Brinkerhoff
Lehman Sits on Bomb of Uranium Cake as Prices Slump (by Linda Sandler, Yuriy Humber and Christopher Scinta, Bloomberg)
Lehman Brothers Sitting on a Stockpile of Uranium 'Yellowcake' (by Andrew Clark, The Guardian)
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