Case | HBS Case Collection | April 1993 (Revised December 1994)

Lehman Brothers and the Securitization of American Express Charge-Card Receivables

by Andre F. Perold and Kuljot Singh


In early 1992, Lehman Brothers had received a mandate from its affiliate, American Express Travel Related Services (TRS) Co., to securitize a portion of its consumer charge-card receivables portfolio. It is now July 22, and Lehman and TRS have just returned from a "road show" that was undertaken to convince prospective investors of the merits of these new securities. Lehman must now price the securities. Because this is the first-ever securitization of charge-card receivables, there are no directly comparable benchmarks that can help in pricing. However, the securities share common features with credit-card receivables backed securities, which by now are well accepted. Another comparable is non-callable finance company debt. This deal is being watched closely by competing underwriters, investors, and senior management at TRS and Lehman. "Success" could catapult Lehman into becoming a major player in the asset-backed market whereas "failure" would be a major setback.

Keywords: Risk and Uncertainty; Credit Cards; Financial Instruments; Stocks; Asset Pricing;


Perold, Andre F., and Kuljot Singh. "Lehman Brothers and the Securitization of American Express Charge-Card Receivables." Harvard Business School Case 293-121, April 1993. (Revised December 1994.)