A market rumor sent shares of Lehman Brothers Holdings Inc. tumbling Friday, exposing the weakening ability of financial services companies to ward off ill-timed news.

The rumor alleged that Lehman's banks, a consortium of 20 domestic and overseas lenders, had cut off the New York brokerage's lines of credit and that the firm was teetering near bankruptcy. Lehman, which has arranged $3 billion in credit lines this year, had sales of $16.4 billion in 1997.

By noon Lehman had categorically denied the charge as "baseless and irresponsible." Many of its lenders, speaking on the condition of anonymity, said there had been no discussion regarding the brokerage's financial condition.

"I'm surprised there's any suggestion of that," said the head of syndications at a major international bank. "There's no such talk."

Major lenders to Lehman include Union Bank of Switzerland, Societe Generale, NationsBank Corp., and Royal Bank of Canada. But bankers described the commitment level among investors as "wide and flat," meaning that the $3 billion was dispersed evenly.

Moreover, those lines, called "backstops," are unlikely to be drawn upon. Lehman's primary source of debt is about $10 billion in corporate bonds.

Reports added that Lehman may be insolvent and headed toward bankruptcy protection, a charge bankers familiar with Lehman's credit said were "just nonsense."

Still, the panic that drove Lehman stock to a 52-week low near $33 Friday shows the increasing vulnerability of financial services companies in what many bankers and analysts fear could be a prolonged bear market.

At issue are the off-balance-sheet losses that have resulted from trading and loans in emerging markets such as Russia, Asia, and Latin America. Bankers say there is growing concern about how much exposure financial firms ultimately have.

Lehman's experience is telling because it underscores the vulnerability of a firm that has lagged its Wall Street peers. It reported losses in 1993, was spun off from American Express in May 1994, and posted only nominal earnings until 1997.

Then came a turnaround.

The fourth-largest investment bank earned $187 million for the fiscal quarter that ended in February, a 30% increase from a year earlier. Net revenues rose 13%, to $1.3 billion, led by a 45% increase in investment banking revenues. Its pretax profit margin improved to 26%, from 24% a year earlier.

But two weeks ago the firm announced trading losses would cut third- quarter earnings 23%, to about $151 million, and that earnings for the first nine months of fiscal 1998 would be about $662 million.

Lehman has not been alone. A dozen commercial and investment banks have made similar announcements. But Lehman may have stirred dormant fears among its investors and made the firm a target for short-sellers. Sources inside Lehman say the report first appeared in a London foreign exchange newsletter published Friday morning.

Katherine Rossow, a bond analyst with Chase Securities Inc., said the story's origination in London suggests there may be untoward motives at work.

"This reminds me of when BankAmerica was in difficulties in the 1980s. The rumors would start in London, just as the New York markets were opening," Ms. Rossow said. "The SEC would investigate, and they never caught anybody. Usually these things got started because someone had shorted the stock."

One banker to Lehman said the firm simply was caught with the kind of off-balance-sheet expenses that have saddled other firms and "was burned for it."

The banker added, "It's exactly what you expect in times like this."

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