Creditors turn up heat on LG Group to rescue LG Card

Creditors turn up heat on LG Group to rescue LG Card

Park Chang-Kyong, Agence France-Presse, Seoul

Korea Development Bank (KDB), embattled LG Card's top
creditor, pressed the LG Group on Wednesday to contribute more to
new rescue efforts to help the country's largest credit card
issuer.

KDB governor Yoo Ji-Chang urged the group to take part in a
new bailout plan for LG Card, warning that the financially-
troubled card issuer could be liquidated in the absence of
support from former parent, LG Group.

"LG Card could face the worst case scenario of liquidation
unless LG Group provides further aid," Yoo said at a news
briefing.

"We don't believe such a scenario will become reality as it
would cause enormous damage not only to creditors but to LG Group
as well," he added.

Earlier on Wednesday, the LG Group said it would likely turn
down a request for additional funds to help LG Card.

"We have done enough to support LG Card and it would be too
much if the creditors ask for more," a group spokesman said.

Yoo said, however, that he had been informed by the LG Group
that it was "weighing and making efforts" to accommodate the
creditors' request.

"We think LG Group intends to aid LG Card," Yoo said.

The state-run Korea Development Bank has been seeking to
convert some 1.2 trillion won (US$1.1 billion) of LG Card's debt
into equity and has pursued a massive capital write-down.

LG Card, which benefitted from a huge rescue package in
January this year, needs these additional measures to avoid being
delisted from the Korea Stock Exchange.

"The debt-for-equity swap should be concluded by the end of
the year. Otherwise, ratings on LG Card will drop and it will
face problems in rolling over its debt," Yoo said

Yoo said the LG Group had not fulfilled its responsibility as
the former parent of the card firm.

On top of the 1.2 trillion won debt-for-equity swap, creditors
plan to cut interest rates on existing debt for LG Card and to
open a fresh credit line of one trillion won, he said.

The Seoul Economic Daily said Wednesday that the LG Group had
been asked by KDB and other creditors of LG Card to convert 875
billion won ($835 million) of debt owed by the card issuer into
equity.

Creditors are planning to take on the remaining 325 billion
won as part of a new bailout package led by KDB, it said.

The LG Group has so far provided a total of 1.175 trillion won
in financial aid to LG Card in the form of buying 300 billion won
of corporate bonds and 875 billion won worth of commercial paper
from the card issuer.

Under current securities law, a firm with losses exceeding 50
percent of its capital for two consecutive years faces delisting
from the stock exchange.

Last year, LG Card's losses surpassed 50 percent of its
capital and the company was put under surveillance by the Korea
Stock Exchange.

If LG Card were to be delisted, it would make it more
difficult for its creditors to attract potential buyers, KDB
said.

LG Card was separated from the LG Group following a series of
bailout packages led by KDB, now the largest shareholder of LG
Card.

LG Card's performance has been improving this year, largely
thanks to the bailout and its efforts to reduce bad assets.

It posted a recurring profit of 23.4 billion won in November,
up from 17.3 billion a month earlier.

LG Card shares gained 11 percent to close at 16,000 won
Friday.