Lehman Brothers was today said to be scouring South Korea for new investment in yet another blow to the beleaguered bank.

Reports in the US said the Wall Street giant, led by chairman and chief executive Richard Fuld, is looking overseas for a cash injection, with South Korea a serious option.

Lehman was last night forced to deny it faced a liquidity crisis and insisted it had not gone to the US Federal Reserve for funds. However, it refused to rule out plans for a cash-raising exercise of around $ 4billion (£2 billion). It said such a move was just one of "dozens" of options it was considering.

The firm has a long history in South Korea thanks to well-connected vice chairman Kunho Cho, its former head of investment banking in Asia-Pacific, and possible partners include the Korea Development Bank and Woori Financial Group.

It would not be the first US or European banking giant to welcome investment from the Middle or Far East to repair its balance sheet in the wake of the credit crunch.

Citigroup turned to Abu Dhabi for funds while UBS sold a stake to the Government of Singapore and Barclays attracted investment from China and Singapore.

But such a move would mark more bad news for Lehman, whose shares fell 9.5% in New York last night to their lowest since August 2003.

Analysts believe the bank could announce its fundraising plans when it unveils quarterly results and an expected loss of more than $300 million - one of the largest in its history - in a fortnight.

Lehman has been plagued by speculation over its future ever since the spectacular collapse and rescue of Bear Stearns in March.