(Recasts with confirmation by KAMCO)
Sept 4 (Reuters) - Merrill Lynch & Co's MER.N talks to sell bad loans to Korea Asset Management Corp (KAMCO) faced a deadlock due to a disagreement over price, the South Korean state agency said on Thursday.
Bloomberg reported earlier, citing KAMCO chief executive Lee Chol-Hwi, that the sale was faltering over differences in assessing the value of assets.
"We have been in talks with Merrill but couldn't narrow the price gap," said a KAMCO spokesman, confirming Lee's comments. "Now we'll drop the discussion so far and start a new round of negotiations."
KAMCO declined to give size and other details about Merrill's assets it seeks to buy.
The government debt clearer is also "keeping channels" with other U.S. institutions to buy distressed assets, the spokesman said, without elaborating.
Failure to strike a deal may indicate Merrill, which has been battered by more than $50 billion of credit market losses, and Lehman Brothers Holdings Inc LEH.N might have to cut prices for assets they are trying to sell.
No-one at Merrill Lynch was immediately available for comments.
Another South Korean state-controlled institution, Korea Development Bank, is in talks with Lehman over a possible joint investment with other Korean banks in the U.S. investment bank. [ID:nSEO69191]
In July, Merrill agreed to sell $30.6 billion of collateralized debt obligations, a kind of repackaged debt, to an affiliate of private equity fund Lone Star Funds, for just $6.7 billion, or about 22 cents on the dollar. (Reporting by Rhee So-eui in Seoul and Saumyadeb Chakrabarty in Bangalore; Editing by David Holmes and Louise Heavens)