LG Card needs capital to survive

LG Card needs capital to survive

SEOUL: Standard and Poor's warned Thursday that LG Card, South Korea's largest credit card company, would require a capital injection much larger than a pledged one trillion won (US$832 million) to be kept afloat.

Eight creditor banks have decided to extend a $1.7 billion rescue package to pull LG Card Co. Ltd. back from the brink of bankruptcy.

In addition LG Group said it would increase the capital of LG Card by one trillion won by the first half of next year, including a 300 billion won rights issue planned for next month.

Assuming a "generous" recovery ratio of 20-30 percent for LG Card's estimated delinquent assets of about eight trillion won among its total assets of about 25 trillion won, the card company's negative net asset value is estimated to be larger than between two and three trillion won, Standard and Poor's said.

"Therefore, the LG group's planned one trillion won capital injection into LG Card will be a drop in the ocean," said Choi Young-Il, a credit analyst at the ratings agency.

Choi of Standard and Poor's said the card industry's operating losses were expected to persist in the near term, although the trend was declining. --AFP