UPDATE 1-Lone Star says no talks on KEB deal with third party

(Adds share price, background)

SEOUL, July 17 (Reuters) - U.S. private equity firm Lone Star on Thursday dismissed reports it had discussed the sale of Korea Exchange Bank (KEB) with other parties than planned buyer HSBC, though prospects for the $6.3 billion deal remain uncertain.

Lone Star's announcement came less than two weeks before the July 31 deadline for HSBC's (HSBA.L) offer to buy control of KEB (004940.KS), South Korea's No.6 bank. South Korean regulators have yet to launch the approval process for the deal, citing legal disputes over Lone Star's South Korean investments pending in courts.

"Lone Star Funds has an exclusive contract with HSBC and has held no discussions with any other parties with regard to the sale of its shares of Korea Exchange Bank," Lone Star [LS.UL] Chairman John Grayken said in a statement.

"We remain committed to our agreement with HSBC."

The comment was a response to a Maeil Business Newspaper report on Thursday that Kookmin Bank 060000.KS, South Korea's top retail lender, was preparing to make a public tender offer for KEB on the assumption that the deal between HSBC and Lone Star would break down.

The daily cited unidentified regulatory and industry sources.

Shares in KEB rose 2.0 percent to 12,750 won by 0213 GMT, in line with the broader market , while Kookmin shares rose 4.3 percent to 54,000 won, recovering from a near 4-month low hit the previous day.

HSBC (0005.HK) agreed to buy 51 percent of KEB from Lone Star last September in a deal closely monitored as a litmus test of South Korea's openness to foreign investors.

The deadlock over the KEB sale has raised speculation about a possible collapse of HSBC's acquisition of KEB and talk Kookmin would jump in the bidding.

KEB confirmed Kookmin's attempt to reach Lone Star, but said no discussions took place between Kookmin and the U.S. investment firm.

(Reporting by Kim Yeon-hee; Editing by Keiron Henderson and Jonathan Hopfner)