June 6 (Bloomberg) -- Lehman Brothers Holdings Inc., poised to report what may be its first quarterly loss since going public in 1994, is in talks to raise as much as $5 billion by early next week, a person with knowledge of the matter said.

Executives at Lehman are negotiating with at least one U.S. pension fund and an overseas investor, according to the person, who declined to be identified because the discussions are confidential. Mark Lane, a spokesman for the New York-based firm, declined to comment.

Lehman, the fourth-largest U.S. securities firm, has already sold bonds and preferred shares to generate $8 billion in capital since February. Chief Executive Officer Richard Fuld is trying to reduce leverage, the firm's ratio of assets to equity, to help offset a decline in the value of debt securities. Concern that Bear Stearns Cos. faced a cash shortage pushed the firm to the brink of bankruptcy in March.

``Their intention is to de-lever their balance sheet, and they've taken some highly publicized measures in order to do that,'' David Goldman, a senior portfolio strategist at Asteri Capital in New York, said earlier this week. ``I have no doubt they'll succeed.''

Lehman fell $1.56, or 4.6 percent, to $32.29 in composite trading on the New York Stock Exchange at 4:08 p.m. The stock has dropped 51 percent this year as the company grapples with the decline of the mortgage and structured credit business. Weak demand for high-yield loans and debt securities backed by real estate has forced firms including Citigroup Inc. and Merrill Lynch & Co. to post record losses.

Share Sale

Lehman raised $4 billion in April through a sale of convertible preferred shares to quell speculation it was short of capital. A rights offering, in which existing stockholders would gain the right to buy shares at a discount, isn't in the current plan, said the person who declined to be identified.

The world's largest banks and securities firms have raised about $282.9 billion since the start of last year as they contend with writedowns and credit losses on mortgage-backed securities and other debt, data compiled by Bloomberg show.

Standard & Poor's cut its assessment of Lehman's creditworthiness one level to A from A+ earlier this week and said the outlook remains negative, noting that a downgrade would be possible if the firm were to incur ``substantial losses.''

Lehman shares already reflect ``worst-case scenarios'' for the investment bank, according to Deutsche Bank AG analyst Mike Mayo, who expects Lehman to raise $4 billion of capital and post a second-quarter loss after $2.9 billion of credit-market writedowns.

Merrill Recommendations

The firm gained $2.45 to $33.85 in composite trading yesterday on the New York Stock Exchange, after rising 2.6 percent the previous day when Merrill analyst Guy Moszkowski recommended investors purchase the stock.

Sanford C. Bernstein & Co. analyst Brad Hintz reiterated his ``market perform'' rating yesterday on Lehman. While the company won't face ``a life-threatening funding run,'' investors should ``remain on the sidelines until the firm demonstrates a reduction in leverage and lowers its exposures to troubled asset classes,'' he wrote in a report.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: June 6, 2008 16:16 EDT