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Korea’s KDB Could Prove to be Lehman Bros. Savior

By Jennifer Yousfi
Managing Editor

Battered shares of Lehman Bros. Holdings Inc. (LEH) got a reprieve when Korea Development Bank expressed interest in a possible capital infusion, sending the stock up almost 10% in early trading.

Lehman has been badly beaten down due to its high exposure to the subprime crisis and management’s refusal to make tough choices when it comes to cutting loose assets. Unlike its financial brethren such as Citigroup Inc. (C) or Merrill Lynch & Co. (MER), Lehman has yet to make any large asset sales in hopes of boosting its bleeding balance sheet.

“Investors are unwilling to accept any positive view of the company; management is unwilling to sell out at a deeply distressed value,” Richard Bove, an analyst at Ladenburg Thalmann wrote, The New York Times reported. “The stage is set for a hostile bid to take over the whole company.”

Lehman shares are down over 75% year-to-date, dragging the firm’s market-capitalization below the $10 billion mark. The stock closed at $14.41 Friday, up $0.69, after settling back down from a high of $15.93 earlier in the day on rumors of a possible investment from Korea’s KDB.

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State-controlled KDB could be shopping for American investment bank bargains to expand its global footprint.

“Korean banks could consider acquisitions of overseas rivals as part of investments for the future,” Han Jeong Tae, an analyst at Hana DaeToo Securities Co. in Seoul told Bloomberg News. “Still, their dilemma is how much risk they could take when no one is confident over the soundness of those rivals.”

The news follows several media reports that Lehman Chief Executive Officer Dick Fuld has been searching for an emergency cash boost from an overseas bank. Investors will watch to see if KDB makes a simple investment or an outright purchase.

A spokesman at the Korea Development Bank in Seoul said Friday that the state-run firm "is considering all kinds of options [with respect to] Lehman Brothers," including an outright purchase, Fortune reported.

News and Related Story Links:

  • Fortune:

Lehman’s clock is ticking

  • Bloomberg News:

Korea’s KDB, Weighing Investment in Lehman, Sees ‘Opportunity’

  • The New York Times:

Burdened by Mortgages, Lehman’s Options Narrow

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This entry was posted on Monday, August 25th, 2008 at 3:26 pm and is filed under Lehman Bros, Top News. You can follow any responses to this entry through the RSS 2.0 feed. Due to the amount of comments we receive Money Morning will not be able to respond to all questions. If you have not already registered to leave a comment, once doing so you will receive Money Morning's Daily Email.

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  1. Pingback by Korea's Government Nixes Possible Lehman Bros. Bid on 26 August 2008:

    [...] of Jun’s comments sent Lehman shares plunging, reversing Friday’s gains after rumors of KDB’s interest in a possible investment were first [...]

  2. Pingback by Lehman Ripe for Takeover as Market Cap Plunges Below $6 Billion on 9 September 2008:

    [...] Fuld’s management of the beleagured investment bank for quite some time. Two weeks ago Bove suggested Lehman could find itself the victim of a hostile takeover if Fuld was not able to negotiate an emergency liquidity [...]

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