Banks to lead LG Card rescue
 |
LG Card is South Korea's biggest credit card company.
Story Tools
YOUR E-MAIL ALERTS
|
Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.
Or, visit Popular Alerts for suggestions.
|
|
SEOUL, South Korea (Reuters) -- State-run Korea Development Bank (KDB) has agreed to lead a joint takeover of LG Card Co Ltd under a revised $4.2 billion rescue plan for South Korea's biggest credit card company, main creditor Woori Bank says.
The proposal, which creditors will decide on by the end of Friday, effectively means the government would shoulder a greater part of the cost of saving the company from bankruptcy.
The news emerged as Finance Minister Kim Jin-pyo said the crisis engulfing cash-strapped LG Card was past its worst and the government would help ensure the problems did not destabilize the financial system.
The company's shares, which have tumbled for days, rose more than nine percent.
"The KDB-led takeover of LG Card is an unavoidable step as no one wanted to take over the firm," said Song In-ho, a fund manager at Kyobo Investment Trust Management Co.
"But until all details are set and they finally complete the deal, we don't know what will happen, given the poor situation in the company."
LG Card is the biggest victim of a soured credit boom that has left overstretched consumers unable to repay their loans. One in seven of its card holders was at least a month behind in payments at the end of November.
The revised proposal has KDB injecting 300 billion won ($250 million) more than planned under a previous $4.2 billion debt-for-equity swap scheme that had deeply divided LG Card's 16 creditors.
The total value of the swap, which would give creditors majority control of the company, remains the same under the new plan. Woori has declined to say how much debt each lender would convert to equity.
"KDB will cough up 300 billion won more in a debt-to-equity swap to head the joint takeover by creditors," said a Woori Bank spokesman. "Sixteen creditors will let us know by the end of today whether they approve the plan."
However, unionized workers at KDB strongly opposed the plan, saying they would not allow the government to use KDB again as a vehicle for bailing out troubled companies.
"We flatly refuse to take the responsibility for the government's failure," a union statement said.
The creditors failed to find a buyer for LG Card by a Tuesday deadline for a takeover. But the company has won some breathing space as most of the 16 creditors and other non-bank financial institutions have agreed to roll over LG Card debt maturing within a year.
LG Card's debt exceeds its assets by 3.24 trillion won.
The troubles at LG and other credit card companies are threatening a stronger recovery in South Korea's economy, Asia's fourth largest, as they could further dampen consumer spending.
Top retail lender Kookmin Bank said on Friday it was likely to post a net loss for the whole of 2003, hit by its own credit card problems.
The finance minister said the government would try hard to keep the crisis from worsening.
"The government plans to lend support to efforts by creditors to keep the LG Card trouble from escalating and destabilizing the whole financial system," Kim said during a radio talk show.
The financial authorities intervened in late November to encourage creditors to provide $1.7 billion of emergency loans to LG Card.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
