Turns out, Korea Development Bank is in talks with Lehman Brothers - but now, after the government threw cold water on prospects for a solo KDB investment, the question has become which local bank will be partnered up with the state-run bank for this bold investment. KDB was to be a “cheerleader” rather than the main player in any deal, the government said. KDB CEO, Min Euoo-sung, headed Lehman’s local operations until earlier this year, so he’s well placed to wield the pom-poms. Investors there are nervous - which they should be given Lehman’s more-than $60 billion of mortgage and mortgage security exposure. South Korean bank shares tumbled today as markets pondered which mighty institution might be encouraged to step up. Names to keep in mind are Shinhan Financial Group, Woori Finance Holdings and Hana Financial Group. How much Lehman might a KDB-backed venture buy? Min said one possibility was for KDB to form a consortium with private banks to jointly buy Lehman. Pricing remains an issue, of course. The Telegraph reported Lehman had stepped up talks with KDB to raise as much as $6 billion in a share sale that could be concluded this week.

Other deals of the day:

* Natural gas producer Chesapeake Energy said it agreed to sell a 25 percent interest in its Fayetteville Shale assets in Arkansas for $1.9 billion to BP America, a unit of BP.

* The world’s third biggest platinum producer Lonmin said a merger with Xstrata would lead to major synergy benefits and the firm would like to hold talks with its hostile suitor if a formal bid is made at a higher level.

* French utility group GDF Suez said it would buy U.S. electricity provider FirstLight Power Enterprises. GDF gave no financial details in a statement, but according to industry sources quoted by Le Figaro newspaper the deal would be worth 1.3 billion euros ($1.91 billion).