LG Card to get new CEO after rescue

SEOUL, South Korea (AP) - Creditors of South Korea's biggest credit card company, LG Card, plan to sell their stakes in the troubled firm next year after orchestrating a 4.8 trillion won (US$4.1 billion) bailout with government help last week, South Korea's vice finance minister said Tuesday. 

Vice Finance Minister Kim Gwang-Lim called the rescue package for LG Card "inevitable'' because a bankruptcy would have undercut South Korea's fragile economic recovery. 

LG Card Co., affiliated with South Korea's third-largest conglomerate, LG Group, narrowly avoided default last fall, rattling investor confidence in the country's card companies and the stability of its financial markets. 

The company had to suspend lending services before a group of 16 creditors organized a last-minute bailout plan on Friday that staved off the firm's failure and averted a blow to the world's 12th-largest economy. 

The state-run Korea Development Bank helped broker the deal by agreeing to provide additional assistance of up to 500 billion won (US$424 million) if the company falls into another cash-flow problem within a year. 

Kim called the move "inevitable'' in a Tuesday interview with PBC Radio.  

One out of four South Koreans own a credit card issued by LG Card, he noted, and the company's assets amount to 24 trillion won (US$2.0 billion). 

"If LG Card goes bankrupt, the financial industry and the economy would have made huge losses,'' Kim said. 

Creditors intend to sell the company next year after it stabilizes, he added.LG Card has an outstanding debt of around 21 trillion won (US$17.8 billion). 

Last week, Finance Minister Kim Jin-Pyo said the economy would incur losses of at least 27 trillion won (US$22.9 billion), if LG Card goes bankrupt. 

Kim said the South Korean economy is forecast to grow at least 5 percent this year. 

But the minister warned that the credit card crisis, along with the North Korean nuclear standoff, could temper the pace. - AP 

Earlier report 

SEOUL: State-run Korea Development Bank (KDB) said yesterday it would replace the management of LG Card Co soon after leading a US$4.5bil rescue of the country’s largest credit card issuer. 

KDB stepped in to hold the bailout together with a late night offer on Friday to shoulder any additional losses at LG Card, saving the company from bankruptcy and averting a wider financial crisis. 

But LG Card shares continued to tumble yesterday, diving by the daily limit of 15% the sixth session running as investors braced for a debt swap and capital write-down that will almost wipe out their equity. 

In the first step to preparing the company for sale in a year’s time, a task force set up by creditors would search for a chief executive to replace LG Card president and CEO Lee Chong-suk, said KDB's Nam Ki-hyon, who is in charge of restructuring the credit card issuer. The new CEO would be empowered to replace other LG Card officials. 

“We plan to take on management of LG Card for one year,” Nam said. After stabilising the company, KDB would sell it to a third party in an auction to either a domestic or foreign buyer, he added. 

In addition, creditors would convert 3.65 trillion won (US$3.09bil) of debt owed by LG Card – including a fresh 1.65 trillion won in loans to be provided soon – into equity within one year. That would give 10 creditor banks a combined stake of 90.4% in LG Card, including a 25% stake for KDB. 

“In order to share the pain with existing shareholders, we will write down its capital after the planned debt-for-equity swap within one year.” Nam said. – Reuters  

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