“The troubled investment bank’s best hope is the Korea Development Bank, which could provide as much as $6 billion in exchange for a significant stake in Lehman, London’s Telegraph reported over the weekend. The Telegraph report didn’t cite sources.It said that Lehman hoped to wrap up talks with KDB this week but added that Lehman “is understood” to be working on alternative plans under which it might get capital from Chinese brokerage Citic Securities or Middle Eastern sovereign wealth funds. Lehman, which has been hit hard by the subprime meltdown and credit crisis, needs capital to shore up its balance sheet.There has been speculation for months that Lehman might follow in the footsteps of Bear Stearns, which collapsed earlier this year and was purchased by JP Morgan Chase. Lehman plans to report third-quarter results in mid-September. Lehman Brothers shares finished Friday up 22 cents at $16.09. U.S. stock markets were closed Monday in observance of Labor Day. “
Lehman Brothers has apparently been doing double-overtime this Labor Day weekend to finish up a deal they have been Working on with the Korean Development Bank:
Yonhap news agency quoted the chief executive of the Korean bank, Min Euoo Sung, who headed Lehman’s Korean operations until earlier this year, as saying that the bank was in discussions to form a consortium with private banks to jointly buy Lehman, but that a pricing gap with Lehman remained.
A senior executive of another top South Korean bank said Tuesday that Korea Development Bank had a substantial interest in Lehman, but that detailed terms of a possible agreement had yet to be determined. He said his bank would delay any decision on whether to participate in a consortium to be formed by Korea Development Bank on concerns that the talks between Lehman and Korea Development Bank could break down. The executive asked not to be named until an announcement was made. “
We need to wait until a deal is done,” he said. “It would be in the form of buying new shares or existing shares. But this kind of deals still has a high possibility of falling through, because Lehman could be in talks with other banks in other parts of the world.”
The paper said Korea Development Bank could buy up to 25 percent of the beleaguered U.S. investment house. Buying a top bank could catapult South Korean financial services firms into the top ranks of global investment houses, which have been battered by heavy mortgage write-downs and seen their share prices tumble. Lehman’s shares have fallen more than 70 percent since the beginning of the year, valuing the bank at around $11 billion.
With a deal as good as done on on some aspect of Lehman’s holdings or another, the door swings wide open for more foreign-money rescue plans. The details of the Lehman deal will certainly be precedent setting for much of the struggling finance industry, which has found itself beaten down by poor portfolio gambles that included high risk Mortgage Backed Securities packaged in too-clever to be a good idea off-the-books investment vehicles that are the now bane of most the major investment houses in North America and Europe.
All we can do now is wait for the details to trickle out this week – the longer it takes, the worse the deal for Lehman, I would suspect. Several weeks ago I hypothesized that the Koreans, and other foreign money sources, really have no good reason to buy a house on fire if they could just wait and get the property for a song, and that Lehman may need the deal more than they do…
Let’s hope Lehman’s position was not as dire as Analysts Have Speculated, that any interested parties are feeling the pressure from one another’s competing interests, and that the example Lehman sets is one of calm and accurate market valuation and negotiation, not desperation or concession. Let’s also hope that the federal government’s applicable regulatory agencies do their due-diligence on this and all the deals to come, that they will be vigilant in their oversight, and not let our financial icons be savaged, all for naught.
I hate to get too cliche, but this is soooo much like the fascinating dynamics that developed between the Wizard, Toto and that Infamous Curtain: Pull it back too soon and the illusion is betrayed, the Wizard’s power rendered nil, all hope is lost. Wait too long, having too much doubt, and you quite possibly never get to where you are going to.
Somewhere in between is good, like the sale of Neuberger Berman and a sizeable chunk MBS. If Lehman can keep up the fire and theatrics long enough keep anyone from being brave enough to pull back the curtain on them, they could help the entire industry immensely.
More analysis of the Lehman deal details are revealed, right here at YourMortgageOrYourLife.com. Plus, we’ll take a look at one of the next institutions that are sure to be on the auction block soon, powerhouse Merrill Lynch.
Your Mortgage or Your Life... 
You better think “Why Korea?”. Here is a clue.
http://business.timesonline.co.uk/tol/business/economics/article4648549.ece
South Korea heads for black September with Won problems:
“A large part of Korea’s foreign reserves are not government bonds but the kind of US-based mortgage-related bonds that once looked so solid. Depending on how the Fannie and Freddie situation develops, a significant portion of Korea’s forex reserves could turn out to be extremely illiquid, leaving the country ever more vulnerable to external shock. “
Great point, but from what I understand, the majority of the losses from the GSE failures will be borne by the shareholders, preferred and common – the bond holders will benefit from the Fed intervention, See the following for my out-on-a-limb theory:
American Regional Banks are holding the same Bonds, and they will all be bailed out by the US taxpayers with the rest of them:
Ciao!