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Eyes on Lehman rescue as Korea lifeline drifts

Reuters

A potential rescue from South Korea for troubled United Nations investment bank Lehman Brothers appeared to have lost further momentum on Monday but other possible investors continued to circle.

South Korea's top financial regulator called on state-owned Korea Development Bank (KDB) to carefully weigh its potential investment in the subprime-hit bank.

"Considering financial market conditions domestically and abroad, KDB should approach buying into Lehman at this point of time very carefully," Jun Kwang-woo, chairman of the Financial Services Commission, told reporters at a briefing.

KDB, headed by the former chairman of Lehman's South Korean branch, is considering an investment with other domestic banks reportedly worth up to $5.3 billion.

Doubt over the prospect of a South Korean lifeline had already emerged last week, when KDB said it was unsure there would be a deal and other lenders denied interest in taking part.

The commission's move followed news at the weekend of a senior management reshuffle at Lehman that saw the appointment of two executives to head the bank's fixed income operations.

Lehman on Sunday named Eric Felder and Hyung Soon Lee as global co-heads of fixed income, following the departure of current global head Andrew Morton.

The bank also appointed Riccardo Banchetti and Christian Meissner co-chief executive officers of Europe and the Middle East and announced that Jeremy Isaacs will retire as chief executive officer for Europe, the Middle East and Asia-Pacific at the end of the year.

NOMURA INTEREST
Separately, Japanese newspaper Yomiuri Shimbun reported on Saturday that Nomura Holdings Inc is considering acquiring a stake.

Japan's Nomura has a pool of funds exceeding 200 billion yen ($1.86 billion) for investing in or acquiring U.S. and European financial institutions, the brokerage's chief executive, Kenichi Watanabe, told Yomiuri Shimbun in an interview on Saturday.

Watanabe said Lehman was one of several candidates and that Nomura would decide whether to make an investment offer after confirming Lehman's business results, which could come as early as next week, and after checking share price moves.

On Friday, Reuters reported that Blackstone Group LP and Kohlberg Kravis Roberts & Co are each looking to buy parts of Lehman's real estate and asset management units, citing sources familiar with the situation.

The sources said Lehman's real estate unit could be worth about $5 billion but none of the companies would comment.

On Monday, the U.S. bank's Frankfurt-listed shares were up over 14 percent at 12.87 euros, outperforming the DJ Stoxx Banks index which surged more than 8 percent after the U.S. government's weekend move to take control of mortgage finance companies Fannie Mae and Freddie Mac.

Lehman is under pressure to raise capital ahead of its earnings announcement this month. It has racked up crippling losses and still bears more than $60 billion of mortgage and commercial real estate exposure.

Lehman is expected to post another big quarterly loss. The bank has already taken $7 billion in credit-related write-downs and losses since the start of the global credit crisis.

The bank has also raised about $12 billion in capital this year through common equity, preferred stock and convertible securities offerings, but analysts and fund managers say this may not be enough

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