LG Card bosses to be replaced soon
 |
LG Card will have to write down almost all of its capital.
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), which is taking a lead role in a $4.5 billion rescue of debt-laden LG Card Co, said on Monday it aimed to replace top management at the ailing card issuer soon.
Sixteen lenders to LG Card gave their support for the bailout in writing by midnight on Friday, saving the country's biggest credit card firm from bankruptcy and averting a wider financial crisis.
"We plan to take on management of LG Card for one year," said Nam Ki-hyon of KDB, who is in charge of restructuring LG Card.
In addition, creditors will convert 3.65 trillion won ($3.09 billion) in debt owed by LG Card -- including a fresh 1.65 trillion won in loans to be provided in the immediate future -- into equity within one year, he said.
"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.
After normalizing LG Card's operations, the state-run lender would sell the credit card issuer to a third party in an auction to either a domestic or foreign buyer, he added.
Shares in LG Card fell 8.3 percent to 1,430 won at 0221 GMT, reversing a gain of around 10 percent after the open, hit by fears the credit card firm would have to cut a large portion of its capital following the bailout.
"Although it was saved for now, LG Card will have to write down almost all of its capital. Who would buy such shares?" said Daniel Baek, a banking analyst at LG Investment & Securities.
A resolution of the LG Card saga, which has lingered for months, boosted shares in banks and LG affiliates.
Late night offer
Shares in Kookmin Bank rose 6.7 percent, Hana Bank added 1.7 percent, while Woori Financial Group gained 2.8 percent. LG Electronics Inc rose 4.9 percent and LG Investment & Securities climbed 7.8 percent.
LG Card resumed cash advance services on Saturday after a two-day halt, after creditors provided 800 billion won in emergency loans from four banks.
KDB stepped in to hold the deal together with a late-night offer to cover any additional LG Card losses after creditors failed to agree who would take further responsibility.
LG Card risked defaulting on debt repayments on Friday without fresh loans from creditors, who have been deeply divided over the proposed joint bail-out.
The government has been trying to keep LG Card's problems from escalating and destabilizing the financial system. Economists fear the crisis could stifle consumer spending in an economy that has only just emerged from recession.
A third of South Koreans are customers to LG Card, the biggest casualty of a credit boom that has left one in 10 South Koreans above the age of 15 unable to repay debt.
Copyright 2004
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
