8-KOther Events

WELLS FARGO & COMPANY/MN 8-K Report, Corporate Update (Sep 15, 2008)

Filed September 15, 2008For Securities:WFCWFC-PDWFC-PCWFC-PYWFC-PAWFC-PLWFCNPWFC-PZ

Summary

Wells Fargo & Company (WFC) filed this 8-K on September 15, 2008, to disclose the financial impact of Lehman Brothers' Chapter 11 bankruptcy filing. The primary concern for investors is the "other-than-temporary impairment" charge Wells Fargo will record on its investments in Lehman Brothers' senior unsecured notes and perpetual preferred securities. These investments, totaling approximately $200 million ($90 million in notes and $109 million in preferred securities) at cost, are now significantly devalued, with the notes trading at 25-30 cents on the dollar and preferred securities at less than 1% of par value. While the impairment charge will negatively affect third-quarter earnings, the filing emphasizes that Wells Fargo has no direct lending exposure to Lehman Brothers. Furthermore, the company's Money Market Funds have no direct exposure to Lehman Brothers, mitigating systemic risk related to this specific bankruptcy event for those funds. The company also reported approximately $50 million in unsecured counterparty exposure to Lehman Brothers as of September 12, 2008.

Key Highlights

  • 1Wells Fargo will record an other-than-temporary impairment charge on Lehman Brothers' securities due to Lehman's bankruptcy.
  • 2Investments in Lehman Brothers senior unsecured notes had a cost of approximately $90 million.
  • 3Investments in Lehman Brothers perpetual preferred securities had a cost of approximately $109 million.
  • 4Lehman Brothers notes are trading at 25-30 cents on the dollar.
  • 5Lehman Brothers preferred securities are trading at less than 1% of par value.
  • 6Wells Fargo has no direct lending exposure to Lehman Brothers.
  • 7Wells Fargo Advantage Money Market Funds have no direct exposure to Lehman Brothers.

Frequently Asked Questions

Wells Fargo will record an other-than-temporary impairment charge on its investments in Lehman Brothers' senior unsecured notes and perpetual preferred securities. This non-cash charge will impact third-quarter 2008 earnings. The total cost of these investments was approximately $200 million.

The company's direct investments in Lehman Brothers' notes and preferred securities were approximately $90 million and $109 million, respectively, at cost. As of September 12, 2008, Wells Fargo also had approximately $50 million of unsecured counterparty exposure to Lehman Brothers. However, the company states it has no direct lending exposure to Lehman Brothers.

No, the filing explicitly states that the Wells Fargo Advantage Money Market Funds do not have any direct exposure to Lehman Brothers, which should alleviate investor concerns regarding this specific area.

The filing indicates that Lehman Brothers' senior unsecured notes are currently trading at 25-30 cents on the dollar, and its perpetual preferred securities are trading at less than one percent of their par value, signifying a substantial decline in market value from their original cost.