UPDATE 2-Lehman credit spreads widen amid KDB speculation

(Updates with quote, stock moves)

NEW YORK, Sept 5 (Reuters) - The cost to insure debt of Lehman Brothers LEH.N rose on Friday amid doubts about the likelihood of an acquisition of the investment bank by state-controlled Korea Development Bank [KDB.UL].

KDB has declined to give any details of negotiations and other Korean banks touted as being part of a consortium have denied interest. For details see [ID:nSP115462].

Japan's Mitsubishi UFJ Financial Group (8306.T) also said this week it has no plans to invest in Lehman, denying a media report that it may bid for a stake in the subprime mortgage-hit U.S. investment bank. [ID:nT164730]

In addition, analysts said Lehman management may be considering plans other than a deal with KDB to shore up the faltering company, including spinning off its commercial mortgage securities into a new company. [ID:nBNG260574]

"Such a move would require the company to attract fresh capital, as the firm would inject one quarter of the equity directly and the remainder would come from debt provided by Lehman and other investors," Barclays Capital said in a report on Friday.

Lehman's credit default swaps rose 20 basis points to 345 basis points, or $345,000 per year for five years to insure $10 million in debt, from 325 basis points on Thursday, according to Phoenix Partners Group.

Shares in Lehman edged down about 0.6 percent in early trading to $15.10. (Reporting by Walden Siew; Editing by Jonathan Oatis)