Lehman strategic plan in sight as KDB talks end

* South Korea's KDB confirms talks ended with Lehman

* Lehman in talks with BlackRock on UK assets - WSJ

* Lehman shares rise in Frankfurt, but world stocks rattled (Adds rise in Lehman's Frankfurt share price, details)

By Marie-France Han and Steve Slater

SEOUL/LONDON, Sept 10 (Reuters) - Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) will try to regain investor confidence on Wednesday with a set of "key strategic initiatives" as hopes for a Korean-led rescue crumbled only hours ahead of the planned announcement.

The struggling U.S. investment bank's plan could include the sale of a package of British real estate assets to BlackRock Inc (BLK.N: Quote, Profile, Research, Stock Buzz) to raise much-needed capital and survive the credit crisis.

Earlier on Wednesday state-run Korea Development Bank [KDB.UL] confirmed talks had ended with Lehman Brothers Holdings Inc over a possible investment.

The Wall Street Journal reported on its website that Lehman is in talks with BlackRock over the sale of UK residential real estate assets and could unveil a separate plan to spin off some commercial real estate assets into a new company, citing people familiar with the matter.

Blackstone (BX.N: Quote, Profile, Research, Stock Buzz) and Kohlberg Kravis Roberts [KKR.UL] are each looking to buy parts of Lehman's real estate and asset management units, people familiar with the situation told Reuters on Friday. The real estate unit could be worth $5 billion, the sources said. [ID:nN05258522]

Lehman, a casualty of the U.S. subprime mortgage crisis, has brought forward the release of the initiatives and quarterly results by a week to 1130 GMT on Wednesday after its shares sank as much as 46 percent on Tuesday on growing concern over its ability to raise capital.

Lehman's shares trading in Frankfurt rose 8.2 percent to 7.15 euros by 0920 GMT, on optimism that some measures to help its capital position will be announced.

The fourth-biggest U.S. investment bank has already taken $7 billion in credit-related writedowns and losses since the start of the global credit crisis.

Facing what may be billions of dollars in additional writedowns, the bank has examined options from selling a stake to a Korean bank to spinning off its investment management unit, but investors have been frustrated at a lack of progress.

"We are announcing that we ended talks at this point in time because of a disagreement over conditions of a transaction and considering domestic and foreign financial market conditions," KDB said.

A South Korean government official said KDB had ended the talks with Lehman due to lack of progress.

World stocks fell towards two-year lows on Wednesday as the problems faced by Lehman stoked concern that banks are struggling to rebuild capital and financial markets remain brittle. The yen trimmed losses, while bonds remained in red.

"Lehman's meltdown won't probably be the last negative episode of this credit crisis," said Christian Jimenez, president of Imene Investment partners, in Paris.

KEY INITIATIVES

The Wall Street Journal said a new company, made up of some commercial real estate assets that are to be spun off, is being referred to internally at Lehman as SpinCo. The remaining portion of the firm, shorn of much of its distressed real-estate assets, is being called CleanCo.

People familiar with the matter told the Journal that a sale of a piece of the company's investment-management unit -- which includes the profitable asset-manager Neuberger & Berman -- could fetch about $5 billion.

Lehman spokespeople in Hong Kong and London declined to comment before the strategy initiatives are announced.

The firm's woes raised the possibility of a Washington-sponsored rescue just a few days after a bailout of mortgage companies Fannie Mae and Freddie Mac and months after the Bear Stearns meltdown, which resulted in a fire sale brokered by the government. U.S. officials declined to comment.

Shares of Lehman plunged as much as 46 percent on Tuesday, wiping out $4.4 billion in market value. The stock closed in New York at $7.79, down $6.36, slashing its market capitalisation to under $6 billion, down from $36 billion a year ago and one-twelfth of the value of Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz).

Investors are worried Lehman may fail to raise enough capital to keep the company operating as losses mount from soured mortgages and other toxic assets.

In what looked like a concerted effort to boost investor confidence in Lehman, a slew of Wall Street firms, including Goldman Sachs and Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), said they were still trading with the firm late on Tuesday afternoon.

For more on Lehman, double click [ID:nN09324233] (Reporting by Sweta Singh in Bangalore, Kim Yeon-hee and Marie-France Han in Seoul, Steve Slater and Natsuko Waki in London, Blaise Robinson in Paris; Writing by Jean Yoon; Editing by Lincoln Feast and Erica Billingham)