South Korea fund could join KDB in Lehman deal

By Kim Yeon-hee and Lee Chang-ho

SEOUL (Reuters) - South Korea's military savings fund would consider joining Korea Development Bank in a bid for Lehman Brothers LEH.N if KDB made such an offer, as now appears a good time for U.S. investments, the fund's chairman said on Wednesday.

State-owned KDB confirmed on Tuesday it was in talks with the struggling U.S. bank over a possible joint investment with other Korean banks. But South Korean banks rumored to be joining the KDB bid consortium denied on Wednesday they were involved.

"We have not received any proposal from KDB. It would be a thing that is worth considering," Cho Young-ho, chairman of the Military Mutual Aid Association, told Reuters in an interview, when asked whether it was interested in joining bidding for the U.S. bank.

"We judge now is a good time to invest. If we form a consortium with other (domestic) savings funds, we will have a substantial capability to invest," he said.

Cho, a retired lieutenant general, added that South Korean savings funds could mobilize up to several hundred million dollars in aggregate for a big deal such as Lehman investment.

Lehman, which has racked up crippling losses and still bears more than $60 billion of mortgage and commercial real estate exposure, is under pressure to raise capital.

The military fund, with $7 billion in assets, is a major South Korean financial investor in M&A deals, behind the National Pension Service and the Korea Teachers Pension Corp.

The fund, controlled by the defense ministry, has invested 300 billion won ($261 million) in Britain's Thames Water which provides drinking water and wastewater services. The 7 percent stake yields returns of more than 11 percent annually.