Korean bank ends LG Card support
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LG Card has been at the heart of South Korea's liquidity crisis.
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SEOUL, Feb 5 (Reuters) -- Korea Exchange Bank, South Korea's sixth-biggest lender, said Thursday it would not extend fresh loans to LG Card Co.
The move could trigger the collapse of a $4.5 billion rescue package for the card issuer.
Bank board members had voted to withdraw their support for the plan, citing likely huge costs related to a planned takeover of its own ailing card unit, said Lee Nahm-yon, a KEB spokesman.
The rejection, the first by any of the 10 lenders who had agreed to participate in the bail-out package, is expected to slow down recapitalization of LG Card, which had been at the heart of a liquidity crisis sweeping the country's credit card industry.
"We had tough talks at the board meeting last night and we decided that we could not afford the plan, considering huge costs expected for the take over of KEB Credit Service," the spokesman said.
The country's sixth-largest bank had agreed to provide 58.4 billion won ($50 million) in fresh loans to LG Card, or 2.9 percent, of the two trillion won that 10 creditor banks and the LG Group had pledged to inject into the card issuer.
Separately, Korea Exchange Bank had extended 58.7 billion won late last year to the country's top credit card company, participating in a two trillion won bail-out plan.
The share price of Korea Exchange Bank is up 2.3 percent to 7,110 won near midday, outperforming the wider market, which added 0.50 percent.
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Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
