Credit Crunch: Small Korean Bank in $6bn Bid to Rescue Lehman
Government-owned development bank in negotiations to become savior for Wall Street firm
A government-owned development bank in Korea has confirmed that it is negotiating to become a savior for Lehman Brothers, the Wall Street bank beset by billions of dollars of losses.
Responding to weeks of speculation, the Korea Development Bank's governor, Min Euoo-Sung, told reporters in Seoul that discussions were under way to provide funds for Lehman, which is tipped to write off as much as $4bn (£2.2bn) in its upcoming third-quarter results.
Min said KDB was in talks "to form a consortium with private banks as [we] believe it is more desirable to acquire Lehman Brothers jointly rather than alone".
He added, however, that there were obstacles to overcome in reaching an agreement: "It is difficult to say how the talks will progress in the future as we have not been able to narrow differences with the Lehman side over prices."
The Korean bank has recruited a boutique advisory firm, Perella Weinberg, to aid in negotiations. It is reportedly working towards an investment of up to $6bn in Lehman in return for a possible stake of up to 25%.
Lehman's shares rallied by 2.3% to $16.46 during early trading on the New York Stock Exchange. The stock has collapsed by 75% since the beginning of the year as confidence in the stability of the bank's finances has ebbed away.
The 158-year-old bank embarked on its fourth round of job cuts last week, reducing its workforce by 1,500 people. Chief executive Richard Fuld is leading efforts to raise money alongside his new chief operating officer, Bart McDade.
A spokesman at Lehman's headquarters in New York declined to comment. But there have been doubts about the transaction among regulators in Seoul.
Jun Kwang-woo, chairman of South Korea's Financial Services Commission, last month queried the logic of a state-controlled bank organizing a bail-out for Lehman. "Generally speaking, the private sector should be the leader in such a deal," he said.
KDB's assets are only a tenth of the size of Lehman's balance sheet.
Responding to weeks of speculation, the Korea Development Bank's governor, Min Euoo-Sung, told reporters in Seoul that discussions were under way to provide funds for Lehman, which is tipped to write off as much as $4bn (£2.2bn) in its upcoming third-quarter results.
Min said KDB was in talks "to form a consortium with private banks as [we] believe it is more desirable to acquire Lehman Brothers jointly rather than alone".
He added, however, that there were obstacles to overcome in reaching an agreement: "It is difficult to say how the talks will progress in the future as we have not been able to narrow differences with the Lehman side over prices."
The Korean bank has recruited a boutique advisory firm, Perella Weinberg, to aid in negotiations. It is reportedly working towards an investment of up to $6bn in Lehman in return for a possible stake of up to 25%.
Lehman's shares rallied by 2.3% to $16.46 during early trading on the New York Stock Exchange. The stock has collapsed by 75% since the beginning of the year as confidence in the stability of the bank's finances has ebbed away.
The 158-year-old bank embarked on its fourth round of job cuts last week, reducing its workforce by 1,500 people. Chief executive Richard Fuld is leading efforts to raise money alongside his new chief operating officer, Bart McDade.
A spokesman at Lehman's headquarters in New York declined to comment. But there have been doubts about the transaction among regulators in Seoul.
Jun Kwang-woo, chairman of South Korea's Financial Services Commission, last month queried the logic of a state-controlled bank organizing a bail-out for Lehman. "Generally speaking, the private sector should be the leader in such a deal," he said.
KDB's assets are only a tenth of the size of Lehman's balance sheet.
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