Price is sticking point in Lehman, Korea bank deal

Analysts predict quarterly loss for US firm of $1.62b

SEOUL - Lehman Brothers Holdings Inc., under pressure to raise cash before reporting third-quarter financial results, hasn't yet struck a deal to sell a stake to Korea Development Bank because the two sides disagree on how much the US firm is worth, KDB's chief executive officer said.

Negotiations have been "difficult because of differences over price," Korea Development Bank chief executive Min Euoo Sung said yesterday.

Lehman chief executive Richard Fuld is racing to raise capital and sell devalued real-estate assets before reporting results in two weeks. Analysts surveyed by Bloomberg predict a loss of about $1.62 billion and say the New York-based firm may be forced to write down roughly $3.25 billion of assets. Lehman shares have plunged 75 percent this year.

If Fuld doesn't raise funds soon, "he will not be at the company," said Richard Bove, an analyst at Ladenburg, Thalmann & Co. in Lutz, Florida. "He simply has to take the medicine of selling a huge chunk of the company to a partner who's going to buy in at an extraordinary low price."

Korea Development is seeking to team up with local banks to buy a stake in Lehman, Min told Yonhap news agency in comments that were confirmed by a spokesman who declined to be identified, citing company policy.

Lehman spokesman Mark Lane declined to comment.

Credit-default swaps on Lehman, which protect buyers in the event of a default, fell 34 basis points to 302 basis points, the lowest level since Aug. 14, according to London-based CMA Datavision.

Lehman is shedding mortgage assets, raising capital and is poised to eliminate as many as 1,000 jobs, or about 4 percent of its workforce, in the fourth round of cuts at the firm this year, people familiar with the matter said last week. The headcount reductions may be revealed when Lehman reports results this month.

Goldman Sachs Group Inc. analyst William Tanona is forecasting $10 billion of write-downs for Lehman, Morgan Stanley, JPMorgan Chase & Co., and Citigroup Inc. in the third quarter. The year-old global credit crunch has so far produced more than $500 billion of losses at the world's biggest banks and securities firms.

Fuld, 62, may set up a company funded by outside investors to purchase some of Lehman's mortgage assets, people familiar with the plan said last month.

Lehman has renewed talks with Korea Development about a capital injection of as much as $6 billion, the Sunday Telegraph reported Aug. 31.

Korea Development may team with a domestic lender, probably Woori Finance Holdings Co. or Hana Financial Group Inc., to buy a stake, Dong-a Ilbo reported yesterday, citing financial officials that it didn't identify.

Lee Jung Dae, a spokesman for Seoul-based Hana, said the company has no plans to join a bid for a stake in Lehman. Woori spokesman Lee Won Chuel said his firm hasn't received any offer from Korea Development or any other party to join a transaction.

Korea Development hired bankers from Perella Weinberg Partners to advise on the talks, which might be concluded this week, according to the Telegraph report. Lehman executives, including Fuld, discussed structures through which the Korean bank may buy as much as 25 percent of Lehman, the Telegraph said.

A government official, speaking on condition of anonymity because he isn't allowed to publicly discuss the matter, said yesterday the financial regulator has yet to receive an application from the bank for permission to invest in Lehman.

Min is accelerating the Seoul-based bank's transformation into an international investment bank and corporate lender. The global credit market turmoil provides "a good opportunity for investments," Min said in July.