(Adds Yonhap report in 8th para)
By Rhee So-eui and Lee Chang-ho
SEOUL, Sept 1 (Reuters) - Lehman Brothers Holdings LEH.N has intensified talks with Korea Development Bank (KDB) to raise as much as $6 billion in a share sale that could be concluded this week, the Sunday Telegraph reported.
South Korea's KDB could buy up to 25 percent of the struggling U.S. investment bank, the paper said, without specifying sources. A spokesman for state-run KDB declined to comment.
A senior source at the Financial Services Commission (FSC), told Reuters South Korean authorities would not oppose or support any deal until price details were known.
That appeared to mark a shift by the regulator, which previously said KDB should let local private banks take the lead in any international acquisitions, dashing hopes for a direct deal with Lehman.
The source said the FSC had not been officially informed of new talks between Lehman and KDB. He said, however, even if there was deal it would be unlikely to be concluded within a week.
But FSC spokesman Yoo Hoon later said the regulator remained uneasy about the state-run bank leading any deal with Lehman.
"We have expressed our concern over KDB being the major player in a deal ... we haven't changed our view," he said.
South Korea's Yonhap news agency said on Monday KDB was seeking to buy Lehman with a private financial institution and majority of funding would come from the private firm, citing a unnamed senior FSC official.
Lehman, which has more than $60 billion of mortgage and mortgage security exposure, is under pressure to raise capital ahead of its results announcement this month. It may post a loss in the third quarter on likely pre-tax writedowns of $3.5 billion, a Morgan Stanley analyst said last week.
Recent sharp falls in valuations at Western banks have presented South Korean banks such as KDB with opportunities for acquisitions that could support their ambitions of becoming global players.
The Sunday Telegraph said if the talks with KDB fall through, Lehman was lining up alternative investments from others, such as China's CITIC Securities (600030.SS), or sovereign funds from the Middle East.
But Lehman was likely to sell no more than 10 percent to CITIC or Gulf investors if it reaches a deal with either, the paper said.
Earlier talks between KDB and Lehman had stalled because of disagreement over pricing, sources have said.
"We haven't received any detailed report since, including the price," said the FSC source, who declined to be identified because of the sensitivity of the issue.
"KDB is supposed to inform us if it finds different options. Everything depends on the price and terms, and the government can comment only after receiving such information."
The source also said any deal would need time for a review. "It can't be this week."
FSC Chairman Jun Kwang-woo said last week state-run institutions taking a leading role in purchasing foreign firms "appears burdensome".
Chinese financial regulators have also repeatedly warned domestic financial firms to be fully aware of investment risks and weigh them against opportunities in the U.S. credit crunch.
China's top brokerage CITIC Securities, which backed out of a proposed investment in troubled Wall Street firm Bear Stearns, said last month it would focus on its domestic business this year.
Lehman's shares have fallen 75 percent since the beginning of the year, last trading at $16.09 per share to value the bank at around $11 billion. (Additional reporting by Jonathan Thatcher and Cheon Jong-woo; Editing by Marie-France Han, Ken Wills and Lincoln Feast)