Lehman Brothers Holdings Inc., reporting the biggest loss in its 158-year history, said Wednesday that it will sell a majority stake in its asset management unit, spin off commercial real estate holdings, and cut its dividend in an effort to shore up capital and regain investor confidence.

In preliminary third-quarter results, Lehman said it posted a $3.9 billion loss on $5.6 billion of writedowns, worse than the $2.2 billion loss analysts had estimated. The company said it is auctioning off about 55% of its asset management group, including fund manager Neuberger Berman, but did not name potential bidders. The real estate spinoff is expected to close in the first fiscal quarter of 2009, according to a statement Wednesday.

Lehman is "formally engaged with" BlackRock Inc., the biggest publicly traded U.S. fund manager, to sell about $4 billion of the investment bank's U.K. residential mortgage holdings, according to the statement. It said the transaction would help reduce its stake in home mortgages by 47%, to $13.2 billion.

Lehman had about $65 billion of mortgage-related assets at the end of its second quarter. Most of the portfolio, about $40 billion, was tied to commercial real estate.

The firm said it plans to spin off $25 billion to $30 billion of commercial real estate investments into a separate, publicly traded company, to be called Real Estate Investments Global, in its first quarter. Lehman also said it will cut its dividend to 5 cents per common share, from 68 cents.

"They are saying, 'We are fine now,' and that's buying them time to negotiate for that additional capital," Brad Hintz, an analyst at Sanford C. Bernstein in New York and former Lehman finance chief, said in an interview.

Pressure on Lehman CEO Richard Fuld mounted Tuesday after talks for an investment by Korea Development Bank ended, sending the shares tumbling 45%. Mr. Fuld is striving to convince investors that the fourth-largest U.S. securities firm will stem losses as housing prices decline. He and his management team also must keep clients and employees from leaving the company. "This is an extraordinary time for our industry and one of the toughest periods in the firm's history," Mr. Fuld, 62, said in the statement.

Credit default swaps on Lehman jumped 75 basis points, to 550 basis points Wednesday morning, said the Phoenix Partners Group brokerage. This surpassed a previous peak in March after the collapse and emergency sale of Bear Stearns Cos. to JPMorgan Chase & Co. Lehman's shares have lost 88% of their value this year.

"It's still this incrementalism that I think ultimately Wall Street's not going to be very satisfied with," Chuck Carlson, a portfolio manager at Horizon Investment Services in Hammond, Indiana, said in a Bloomberg Television interview. "Lehman is trying to cling to the fact that they came come out of this independent and I'm not so sure that that's going to be the case."

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