Korea's KDB confirms Lehman stake talks over

September 10, 2008

State-run Korea Development Bank (KDB) confirmed on Wednesday it was no longer in talks with Lehman Brothers over a possible multi-billion dollar investment in the troubled US bank.

After a day of conflicting reports about whether South Korea would ride to the 158-year-old bank's rescue, the KDB said in a statement it called a halt to negotiations because the two banks could not agree terms and due to market conditions.

Lehman, a casualty of the US subprime mortgage crisis, will report its quarterly results at 1130 GMT on Wednesday, a week earlier than scheduled, and announce ``key strategic initiatives'' after its shares sank as much as 46% on Tuesday on growing concern over its ability to raise capital.

``We are announcing that we ended talks at this point in time because of a disagreement over conditions of a transaction and considering domestic and foreign financial market conditions,'' the KDB said in a statement.

Earlier, a KDB official in charge of talks with the Wall Street bank said KDB had made a proposal to Lehman but a deal looked unlikely. He declined to say when the offer had been made.

Two government officials with knowledge of the matter also told Reuters talks had ended between Lehman and the KDB, but the Yonhap news agency, quoting an unnamed KDB official, said the two sides were still negotiating, briefly boosting the dollar on global money markets.

Talks never `serious'

KDB, headed by the former chairman of Lehman's South Korean operations, had considered investing up to $US5.3 billion in Lehman with other Korean banks.

Asked why the negotiations had broken down, one of the government officials said: ``Their talks had not developed to a serious level. There have been several investors who have been in discUSons with Lehman other than us''.

Doubts over whether South Korea would throw Lehman a lifeline had emerged late last week, when KDB said it was USre there would be a deal and other Korean lenders denied they were interested in joining a KDB-led approach.

Tumbling stock markets in the wake of the subprime crisis have forced US banks to seek fresh capital after heavy asset write-downs, and made them more affordable for Asian investors looking to boost their global profile.

Lehman has already taken $US7 billion in credit-related write-downs and losses since the start of the credit crisis.

Reuters