Seoul: State-run Korea Development Bank (KDB) has abandoned negotiations about buying a stake in troubled US investment bank Lehman Brothers, a financial regulator said Wednesday.
It is now concentrating its attention on privatisation after shelving plans to invest in foreign banks, the Financial Services Commission an official said on condition of anonymity. “Talks are over. (Lehman) appears to be talking with another potential investor,” he said.
“KDB is not expected to resume negotiations with Lehman. Its privatisation is more important.”
Financial Services Commission chairman Jun Kwang-Woo on Monday urged KDB to be cautious about any Lehman deal in light of its possible privatisation.
KDB, set up in 1954 to finance the nation’s industrial and economic development, had reportedly been eyeing a 25% stake in the ailing US bank for some five to six trillion won ($4.3-5.2 billion).
The bank is South Korea’s fifth largest, with assets of about $120 billion. The government hopes to privatise it by 2012 and turn it into a global player by allowing it to acquire other financial companies.
Yonhap news agency, however, quoted an unidentified KDB official as saying it still wants to buy a stake in Lehman for $6 billion.
“We cannot say whether our bank has ended talks with Lehman or not,” a KDB spokesman said.
Lehman suffered billions of dollars in writedowns and credit losses in the crisis triggered by the meltdown of the US subprime mortgage sector.
Its shares, which have been under pressure for months, sank as much as 46% on Tuesday on growing concern it will not be able to raise the capital it needs to survive the credit crisis.
The drop came just two days after the US government announced its plan to bail out two giants in the mortgage business.