Finance Investment Banking
Sept 3, 2008
By: Gail Kalinoski, Contributing Editor
Buzz about a possible sale of Lehman Brothers escalated today after a top official at state-owned Korea Development Bank confirmed that KDB was trying to form a consortium with private banks to buy a stake in the troubled investment banking firm.
Several news reports out of Seoul quoted Min Euoo-sung, CEO of KDB, as saying talks about Lehman Brothers were ongoing but were running into problems over prices. Min, who had been head of Lehman’s operations in Seoul until joining KDB in June, did not indicate how much of a stake a the consortium would seek. But Britain’s Sunday Telegraph had reported over the weekend that the deal could be as much as $6 billion for a 25 percent stake in the fourth-largest U.S. investment bank.
KDB, which is South Korea’s sixth-largest bank, was founded in 1954 after the Korean War ended to help industrial development. The government is aiming to privatize KDB within the next four years. In a late July press conference, Min said KDB would take advantage of the current capital market and look at potential acquisition targets inside and outside Asia, including financial companies, according to the Korean Herald. He estimated KDB could shop for bargains for the next one to two years while the market settles down.
Lehman, which has not commented publicly on the KDB takeover rumor, has been hit hard by the mortgage and credit crisis. The firm has already written down approximately $8 billion due to credit problems. As previously reported by CPN, Lehman had a net loss of $2.8 billion for the second quarter, which ended May 31, 2008, compared to net income of $489 million for the first fiscal quarter of the year, and $1.8 billion compared to the second quarter of fiscal 2007.
Analysts are projecting losses of up to $4 billion when Lehman Brothers reports its third-quarter results later this month. Various media reports speculate that Lehman will seek to nail down a deal that would infuse capital into the firm before that to help offset the expected losses. CPN reported Aug. 17 that Lehman Brothers might be in talks to sell as much as $40 billion in commercial real estate assets. Possible buyers of the portfolio, which had been valued at $52 billion nearly a year ago, were identified in news reports as Blackstone Group, Black Rock, Colony Capital and J.E. Roberts Cos.
Other options reportedly being explored by Lehman Brothers include tapping into the growing market for commercial real estate debt by possibly setting up a company that would be capitalized b y other investors and acquire some of its mortgage assets, according to an Aug. 28 CPN story. CPN also recently reported about the possible default of a $225 million mortgage on a Harlem apartment redevelopment included in a CMBS pool owned by Lehman.
By: Gail Kalinoski, Contributing Editor
Buzz about a possible sale of Lehman Brothers escalated today after a top official at state-owned Korea Development Bank confirmed that KDB was trying to form a consortium with private banks to buy a stake in the troubled investment banking firm.
Several news reports out of Seoul quoted Min Euoo-sung, CEO of KDB, as saying talks about Lehman Brothers were ongoing but were running into problems over prices. Min, who had been head of Lehman’s operations in Seoul until joining KDB in June, did not indicate how much of a stake a the consortium would seek. But Britain’s Sunday Telegraph had reported over the weekend that the deal could be as much as $6 billion for a 25 percent stake in the fourth-largest U.S. investment bank.
KDB, which is South Korea’s sixth-largest bank, was founded in 1954 after the Korean War ended to help industrial development. The government is aiming to privatize KDB within the next four years. In a late July press conference, Min said KDB would take advantage of the current capital market and look at potential acquisition targets inside and outside Asia, including financial companies, according to the Korean Herald. He estimated KDB could shop for bargains for the next one to two years while the market settles down.
Lehman, which has not commented publicly on the KDB takeover rumor, has been hit hard by the mortgage and credit crisis. The firm has already written down approximately $8 billion due to credit problems. As previously reported by CPN, Lehman had a net loss of $2.8 billion for the second quarter, which ended May 31, 2008, compared to net income of $489 million for the first fiscal quarter of the year, and $1.8 billion compared to the second quarter of fiscal 2007.
Analysts are projecting losses of up to $4 billion when Lehman Brothers reports its third-quarter results later this month. Various media reports speculate that Lehman will seek to nail down a deal that would infuse capital into the firm before that to help offset the expected losses. CPN reported Aug. 17 that Lehman Brothers might be in talks to sell as much as $40 billion in commercial real estate assets. Possible buyers of the portfolio, which had been valued at $52 billion nearly a year ago, were identified in news reports as Blackstone Group, Black Rock, Colony Capital and J.E. Roberts Cos.
Other options reportedly being explored by Lehman Brothers include tapping into the growing market for commercial real estate debt by possibly setting up a company that would be capitalized b y other investors and acquire some of its mortgage assets, according to an Aug. 28 CPN story. CPN also recently reported about the possible default of a $225 million mortgage on a Harlem apartment redevelopment included in a CMBS pool owned by Lehman.
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