State-owned Korea Development Bank (KDB) confirmed on Tuesday that it was in talks with Lehman Brothers for a possible investment in the troubled U.S. bank, but other reports said the price of the deal remained an issue.
"Our CEO said a deal is ongoing and cannot disclose the content of it," KDB spokesman Cho Hyun-eek said.
Lehman, which has more than $60 billion of mortgage and mortgage security exposure, is under pressure to raise capital ahead of its results announcement this month.
Yonhap news quoted KDB CEO Min Euoo-sung, who headed Lehman's local 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 told Reuters on Tuesday that KDB 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 KDB, on concerns that the talks between Lehman and KDB could break down. The executive asked not to be named until an announcement was made.
"We need to wait until a deal is done. 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," he said.
A spokesman for Woori Bank, a unit of Woori Finance Holdings, also said it needed to wait before it decided whether to team up with KDB to buy a stake in or acquire the Wall Street bank.
Britain's Sunday Telegraph reported that Lehman had intensified talks with KDB to raise as much as $6 billion in a share sale that could be concluded this week, without specifying sources.
The paper said KDB could buy up to 25 percent of the beleaguered U.S. investment house.
Buying a top bank could catapult South Korea's financial services firms into the top ranks of global investment houses, which have been battered by heavy mortgage writedowns 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.