KDB and the Artifice of the Deal, Part 2

In the annals of interesting Wall Street stories this one may rank right up there.

Technically the things that Korean Development Bank CEO Min Euoo Sung is saying are true. He is talking with Lehman. He has spoken with other Korean banks about this deal. He would like to form a consortium to buy a big chunk of Lehman since it is now clear he cannot do it on his own.

The problem with the story is that Lehman is likely to be seriously insolvent and cooler heads in the Korean financial community and government seem to know it after having looked at the books. At least so they have said.

The government has already said "no" to the ambitious plans of Min to buy a place on the financial world stage.

He is viewed as 'reckless' and overly ambitious by the Korean financial community and with good reason, having taking a recent bath in the subprime, showing among the worst performances of Korea's major financial institutions.

He has a certain amount of power, and an affinity to Lehman. He does not seem to have the latitude to make the deal on his own, and the major banks have already said 'no.' We have not checked his biography carefully so we do not know yet how he is wired into the Korean government. Son? Protege? He was both Lehman's and Solly's regional manager at various times.

We'll keep an eye on this one, but our instincts are telling us that this deal is not only dead, but its starting to smell, and won't get up no matter how hard Min flogs it in the media.

A small stake might get done. We'd suggest that $6 billion is the full extent of Min's latitude at most, but more likely he was cut back to $4 billion or less. And its just not enough to get Lehman out of trouble or buy a large enough stake to give a big enough platform for Min to strut his stuff on a bigger stage.

Worst case the financial talking heads will just use this to paint the tape with the headlines as noted. The objective seems to be to offload losing positions on to the public, of whatever nationality, one way or the other.

If this deal falls through, the pundits will opine that Lehman could also do a deal with some other maverick somewhere usually identified as a 'Mideastern type' or another usual suspect for a fast deal in a troubled US company. Does Iraq have a development bank?

We have a funny feeling about this whole situation. Still nothing is so strange as real life. Let's see what happens.