Lehman Met With Koreans For Capital, No Deal Struck

Yet another rumor about Lehman that has been bandied about in recent weeks turned out to be true.  Lehman had "advanced talks" with potential Korean investors and failed to reach a deal immediately before the $6 billion capital infusion announced Monday, the Financial Times reported.  Lehman executives "ran out of time to complete negotiations on the terms of the transaction in which the institutions would have taken a stake."  After insisting over and over again that it didn't need capital, somehow Lehman ran out of time to secure funding?  Let me do a Wall-Street-style interpretation of that statement for my less skeptical readers.  Lehman was trying to quickly stuff the investment down the Koreans' throats before it announced it had lost $2.8 billion this quarter.  I'm not necessarily saying Lehman's head honchos lied to the Koreans about the company's impending losses, I'm only implying that they knew the stock would be absolutely punished on the "unexpected" news and they had to get the deal completed beforehand.  

Two of the potential investors mentioned who have since denied any involvement in the talks were Kookmin Bank ( aka "We kooky, but not that kooky to invest in Lehman.") and Woori Finance Holdings (aka "We worry about Lehman investment.")  According to the Financial Times, any deal struck would've given Korean institutions access to Lehman's capital markets expertise, granting Lehman access to the Korean groups' balance sheets in return.  The Koreans seemed to have realized at the last moment that their balance sheets deserve a significant premium to Lehman's capital markets expertise.  Maybe after hearing that the only line item that showed an increase in Lehman's financial results this quarter was compensation costs, which leapt 22%, the Koreans may believe their toilet paper deserves a significant premium to Lehman's capital markets expertise.