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.