LG Group pushed to rescue LG card

LG Group pushed to rescue LG card

Agence France-Presse, Seoul

The South Korean government said on Thursday creditors could
pull the plug on a rescue bid for LG card unless the firm's
parent company, LG Group, provides more financial aid.

South Korea's number one card issuer could face insolvency
within days, a senior finance ministry official said.

Efforts to rescue heavily endebted LG Card are mired in a
dispute over how the burden of a planned 5.15 trillion won
(US$4.3 billion) bailout package should be shared among creditor
banks, LG Group and the government.

In the government-backed package, state-owned Woori Bank and
Korea Development Bank (KDB) would join 14 other creditors in the
bailout based on a four trillion won equity swap and 1.15
trillion won in aid promised by LG Group.

In a bid to make the proposal more acceptable to reluctant
creditors, KDB has offered to raise its stake in LG Card from 19
percent to 25 percent.

Director General Byeon Yang-Ho of the Financial Policy Bureau
of the Ministry of Finance and Economy said KDB would take over
LG Card and turn it into a subsidiary.

However, creditors have expressed concern about an unspecified
amount of additional liquidity which would be necessary to keep
the company afloat over the coming year.

Byeon said KDB should shoulder 25 percent of the newly
required liquidity while LG Group, South Korea's second biggest
conglomerate, should provide the remaining 75 percent, suggesting
that other units of LG Group would buy debt issued by LG Card.

"If LG Group rejects this proposal, creditors will pull the
plug on LG Card and it would be only a matter of a day or two
before the company would face insolvency," Byeon told
journalists.

LG Group, however, said it had no way of meeting the
creditors' demands.

It noted that its large shareholders, including members of the
founding family, have already offered their stakes in the group
as collateral and that they have taken part in providing one
trillion won of liquidity to LG Card.

LG Card's crisis highlights the problems of South Korea's
shaky credit card industry. At the end of November, LG Card's
delinquency rate rose to 14.7 percent from 11.4 percent at end-
October.

The delinquency rate at South Korea's eight credit card firms
jumped to 13.5 percent at the end of November from 11.7 percent
in October. Total defaults rose to 7.7 trillion won from 6.9
trillion won.