STATE-OWNED Korea Development Bank was still considering a deal to acquire troubled United States investment bank Lehman Brothers, a South Korean business newspaper reported yesterday.

The Korea Economic Daily quoted a high-ranking government official as saying on Sunday that the bank had not given up and that he was aware the two entities were maintaining a channel for dialogue. Britain's Telegraph reported on its Website that Lehman hoped to conclude a deal this week with KDB, which would inject as much as US$6 billion in capital in return for what the paper called a "significant" stake in the bank.

The report also said Lehman was working on alternatives to KDB, including China's CITIC Securities or sovereign wealth funds from Abu Dhabi and Qatar.

Spokespersons for KDB, Lehman Brothers and South Korea's Financial Services Commission all declined to comment.

Separately, FSC Vice Chairman Rhee Chang-yong said yesterday that he was aware KDB was reviewing a plan to invest in a global investment bank, according to the commission's spokesman Yoo Jae-hoon.

Speculation has been rampant in recent weeks that Lehman Brothers Holdings Inc, the fourth-largest US investment bank, could try and reach a deal for a capital injection. Analysts project that Lehman, considered to be the most vulnerable to the credit crisis, could post losses of up to US$4 billion when it reports third-quarter results in mid-September. It is expected that the investment bank will also announce a deal to raise fresh capital to help offset the losses.

Recent reports have listed KDB, which the government plans to privatize, among the top overseas candidates to invest in Lehman.