By Kim Jae-kyoung
Staff Reporter

With the delay of a last-minute compromise between the government and LG Group, LG Card faces a renewed threat of bankruptcy.

But the group’s pledge to shoulder future losses of the troubled card company raised hopes for normalizing the nation’s largest card giant.

The card company again halted its cash advance services on Thursday due to cash shortage problems. In late November, LG Card suspended its cash advance service for three days.

Without financial aid from creditors, LG Card may shortly face bankruptcy as debt worth more than 500 billion won will mature in the coming days.

The ball has returned to LG Group’s court as creditor banks of LG Card demanded the second largest conglomerate cover 75 percent of future losses in return for a bail out of the debt-ridden company.

The compromise between LG Group, creditors and the government has made some progress as the business group had agreed to provide additional funds into its card arm, raising hopes for the dramatic compromise.

But it is still unclear whether LG Group would accept the proposal because the three parties differ on the amount of additional losses the group will have to shoulder.

``Our group executive officials are discussing ways to solve the LG Card problem,’’ a LG official said on condition of anonymity.

``We have an intention to offer additional funds for the card firm, but the creditor group’s demand is too much,’’ he added. `` Any form of agreement should be made to prevent bankruptcy by today.’’

Ten creditor banks of the card issuer on Thursday reached a provisional agreement to have the ailing firm put under the management of the state-run Korea Development Bank (KDB), which will control 25 percent of stakes in LG Card.

They also agreed to ask the LG Group to shoulder 75 percent and the KDB to take responsibility for 25 percent of additional losses.

But KDB said it could take possession of 25 percent of the firm and serve as a leader in the joint management team, but insisted that other banks, including Kookmin and Woori, also be responsible for additional losses.

Under the revised bailout plan introduced by Woori Bank, the firm’s main creditor, KDB is required to buy a 25 percent stake, or 567.4 billion won ($421 million) in shares, in LG Card rather than 19 percent as originally proposed.

For the remainder, Kookmin will offer 205.9 billion won; the National Agricultural Cooperative Federation, 242.3 billion won; Woori, 175.6 billion won and Shinhan, 81 billion won.


kjk@koreatimes.co.kr