By Kim Jae-kyoung
Staff Reporter

LG Card became technically insolvent on Friday, as it has nearly failed to pay a matured debt due to severe liquidity problems.

According to Shinhan Bank, LG Card narrowly avoided facing bankruptcy on Friday as Kyobo Life Insurance withdrew its earlier demand for the payment on the matured bill worth 308 billion won.

``LG Card was on the verge of going bankrupt as there was not enough money in the card firm’s deposit account to make payments for the bill to Kyobo,’’ a Shinhan official said.

``But in consultation with LG Card, Kyobo decided to withdraw its call for the payments,’’ he added.

Although the card firm avoided the bankruptcy, the cash-strapped firm, without the proposed 2 trillion won emergency funds, may have no choice but to face bankruptcy as a large amount of debt will mature in the coming weeks.

Creditors of LG Card and its parent LG Group remained sharply divided over the scope of collateral needed for the bailout of Korea’s largest credit card company, raising concerns over creditors’ scraping the bailout plan.

In return for the fresh cash injection, creditors demanded LG Group Chairman Koo Bon-moo and his family members offer their stake in LG affiliates as collateral, but LG Group refused it.

Creditors plan to make a final decision on the matter on Monday.

In the meantime, LG Card suspended its cash advance services from 1 p.m. to 5:30 p.m. on Friday due to what company officials called a technical problem with its automatic teller machine (ATM) network.

But, analysts speculated, the suspension might be linked to its cash flow problems.

The shutdown meant many of LG Card’s 14 million customers were unable to pay their bills on time, they said.

More than 50 percent of South Korea’s 25 million adults hold LG cards.

An LG Card official said, under a contract, banks are unable to discontinue cash advance services for customers, ruling out the possibility that it chose to stop the service.

Last Wednesday, KEB Card, or Korea Exchange Bank Credit Service, also suspended its service temporarily.


kjk@koreatimes.co.kr