June 3 (Bloomberg) -- Lehman Brothers Holdings Inc. may seek more capital to allay investor concerns as the securities firm prepares to report its first quarterly loss since going public in 1994, according to analysts.

The fourth-biggest U.S. securities firm probably will post a second-quarter loss of 50 cents to 75 cents a share, analysts at Oppenheimer & Co. and Bank of America Corp. have said. New York-based Lehman holds ``very large, illiquid'' assets and ``we can't rule out equity issuance'' to replenish the balance sheet, Merrill Lynch & Co. said in a report yesterday.

Lehman may seek as much as $4 billion by selling common stock, the Wall Street Journal reported today, citing unidentified people with knowledge of the matter. The company has raised $8 billion since February amid asset writedowns and losses from the collapse of the U.S. subprime mortgage market. Lehman dropped 48 percent in New York trading this year.

``We're in a market environment where sometimes perception becomes reality,'' Diane Hinton, an analyst at Standard & Poor's, said in a call with investors and journalists. ``We think there is increasing pressure on Lehman to address these concerns'' about liquidity and capital, Hinton said.

Lehman spokesman Mark Lane declined to comment. The company's shares fell $1.42, or 4.2 percent, to $32.41 at 12:31 p.m. in New York Stock Exchange composite trading, the biggest decline in the 11-company Amex Securities Broker/Dealer Index. They dropped 8.1 percent yesterday.

Credit-Default Swaps

Credit-default swaps tied to Lehman bonds climbed 2 basis points to 242 basis points, according to London-based data provider CMA Datavision. The contracts rise when investors' perceptions of credit quality decline.

Chief Executive Officer Richard Fuld said at the annual shareholders meeting in April that ``the worst is behind us'' in the credit-market contraction that has cost the world's biggest banks and brokerages more than $387 billion. The firm is scheduled to report second-quarter earnings the week of June 16.

Financial-services firms have been forced to raise $283 billion to cover the losses, according to data compiled by Bloomberg. Citigroup Inc., the biggest U.S. bank, has raised the most, pulling in more than $44 billion with a combination of stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.

The Federal Reserve has also provided capital through new lending programs that let firms borrow using mortgage-backed securities and other assets as collateral.

Leverage Ratio

Lehman Chief Financial Officer Erin Callan said last month at an industry conference in New York that the firm's leverage-- the ratio of assets to equity -- declined to 27 to 1 from almost 32 to 1 at the end of the first quarter. The company needs more capital because of declines in the credit markets, David Einhorn, a hedge fund manager who's betting Lehman shares will fall, said in an interview last week.

S&P downgraded the credit ratings of Lehman and bigger New York-based competitors Morgan Stanley and Merrill yesterday, saying they may disclose more writedowns for devalued assets. Lehman's credit rating was cut to A from A+, as was Merrill's.

Lehman doesn't have a capital issue right now, S&P's Hinton said on a conference call today.

``I understand they are seeking to raise additional capital,'' Hinton said. ``From our point of view that is a good thing.'' She said Lehman is ``getting near'' its cap on selling so-called hybrid securities.

The S&P downgrades may make it harder for the banks to sell derivatives such as credit-default swaps that are tied to bonds or loans, said Brad Hintz, an analyst at Sanford C. Bernstein in New York, who has a ``market perform'' rating on Lehman.

``Lehman needs to reduce its leverage ratios to reflect the new realities of the fixed-income marketplace,'' Hintz wrote in a report to clients today. ``This will not be good for the firm's revenue base.''

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: June 3, 2008 12:32 EDT