The filing could signal the end of the 158-year-old investment bank.
Lehman Brothers said it had proposed motions allowing it to continue its operations, and make wage and salary payments to its employees.
None of the firm’s subsidiaries would be included in the filing and they will continue to operate, it said. Clients of Lehman Brothers and Neuberger Berman, the firm’s New York-based asset management subsidiary, “could continue to trade or take other actions with respect to their accounts”, the bank said.
Fully paid securities belonging to clients of Neuberger Berman would not be subject to claims by Lehman’s creditors, the firm added.
According to the company’s announcement, it is in advanced discussions with a number of potential buyers to sell its investment management division, and is also exploring the sale of its broker-dealer operations.
The filing comes after months of speculation the loss-making bank would suffer a similar fate to Bear Stearns, which had to be rescued by JP Morgan and the US Federal Reserve in March. Like Bear Stearns, confidence in the firm has been hit due to its heavy exposure to the US mortgage market amid an explosion in subprime delinquencies.
Over the past year, a number of potential buyers have been linked with all or part of the firm, including UK-based Barclays and Korea Development Bank, but no deals have come to fruition.
Meanwhile, a coterie of senior management figures have arrived and departed through the firm’s revolving doors. On September 8, Lehman appointed Eric Felder and Hyung Soon Lee as New York-based global co-heads of fixed income. They replaced Andrew Morton, an ex-quant who joined the firm in February.
Last week, Lehman said it expected a record third-quarter loss of $3.9 billion. It also unveiled a "strategic restructuring" package to mitigate the effect of its staggering losses. It included selling its large residential mortgage portfolio to asset manager BlackRock and creating a spin-off company to manage its commercial real estate assets.
Reflecting a broader state of confusion among the bank’s employees, a spokeswoman for the firm in London was unable to say whether the plan would now be carried out or not.
Fears over Lehman’s solvency led the International Swaps and Derivatives Association to hold an emergency trading session yesterday. For four hours on Sunday, traders sought to reduce their counterparty exposure to the firm with offsetting over-the-counter derivatives trades in credit, equities, foreign exchange, rates and commodities. Any trades conducted during this period were contingent on Lehman filing for bankruptcy by 11.59pm New York time.
Other media sources said the company’s New York headquarters had been cordoned off by police.
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