June 4 (Bloomberg) -- Investors in the options and debt- derivatives markets are betting Lehman Brothers Holdings Inc. has further to fall amid concern the fourth-largest U.S. securities firm may need a capital injection.

Options traders increased their bearish positions to a two- month high yesterday, after analysts said Lehman may report its first quarterly loss since going public in 1994. Credit-default swaps on the New York-based firm jumped 19 basis points to 275 today, according to CMA Datavision prices. The contracts rise when investors' perceptions of credit quality decline.

Lehman, which dropped to an almost five-year low on the New York Stock Exchange yesterday, declined 2.4 percent to $29.88 in composite trading at 9:35 a.m. The shares are down 54 percent this year, the worst performance on the 11-company Amex Securities Broker/Dealer Index. Lehman may seek funds from overseas investors, including at least one in South Korea, the Wall Street Journal reported today without citing sources.

``Lehman may need to raise equity capital,'' said Bank of America Corp. analyst Michael Hecht in a report to clients. He estimates the company will report a second-quarter loss of about 50 cents a share during the week of June 16.

Trading of Lehman put options rose to 283,676 contracts, or quadruple the 20-day average, and bearish bets on the company exceeded bullish ones by 1.6-to-1. The most-active contracts were June $30 puts, which gained 68 percent to $3.35. Trading in put options that give investors the right to sell the stock at $17.50 by June 21 rose to almost 14,000 contracts yesterday.

Bondholder Risk

``If there is a risk, and we do not think so, it is for shareholders and not bondholders,'' Andrea Crepaz, a Munich- based credit analyst at UniCredit, wrote in a note to investors today.

Lehman shares fell yesterday by the most since March 17, the day after Bear Stearns Cos. agreed to be acquired by JPMorgan Chase & Co. in order to stave off potential bankruptcy. The decline occurred even after Lehman denied borrowing from the Federal Reserve and said the firm's cash holdings have increased.

The company had more than $40 billion of liquid assets at the end of the quarter, up from $34 billion three months earlier, Treasurer Paolo Tonucci said in an e-mailed statement. The last time Lehman borrowed from the Fed was on April 16, he said.

Lehman was the most actively traded stock on U.S. exchanges yesterday, with more than 136 million shares changing hands.

Hedging Losses

The firm lost $500 million to $700 million on hedging positions in the second quarter, which may prompt it to seek more capital by selling a stake to an outside investor, the Financial Times reported, citing unidentified people familiar with the matter.

The Wall Street Journal said Lehman may seek capital from Seoul-based Korea Development Bank and Woori Financial Group. Officials at the South Korean companies declined to comment.

``Korean banks have ample capital to make investments in the U.S., which may provide good opportunities for them,'' said Ko Seoung Pil, who helps oversee the equivalent of $2 billion at CJ Asset Management Co. in Seoul.

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.

Writedowns and Losses

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.

Standard & Poor's downgraded the credit ratings of Lehman and bigger New York-based competitors Morgan Stanley and Merrill Lynch & Co. two days ago, saying they may disclose more writedowns for devalued assets. Lehman's credit rating was cut to A from A+, as was Merrill's.

To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net.

Last Updated: June 4, 2008 09:38 EDT