Agreement Reached on LG Card Crisis

The government, creditors and LG Group reached a compromise on the normalization rescue plan and finally put an end to the two-month LG Card crisis.

Accordingly, LG Card, which was on the verge of bankruptcy, will normalize their business under the management of Korean Development Bank and the suspended cash advance service will resume its operation on Friday.

On Friday at 9 p.m., representatives of LG Card’s 16 financial companies held a meeting in Woori Bank headquarters in Heohyun-dong and agreed to the normalization rescue plan which actually calls for Korean Development Bank to unilaterally manage LG Card as the largest single shareholder with 25 percent of its stock.

After aiding with 3.65 trillion won of liquidity, creditors will swap debt for equity and Korean Development Bank and LG Group will each take responsibility for 25 percent and 75 percent of loss up to 500 billion won induced hereafter.

The term for the joint financial burden is set for one year and actions will not be taken on the collateral for this year, the stock of LG Group’s majority shareholder.

Kukmin and Shinhan Bank, who have been negligent in shouldering the burden and accused LG Group for its responsibilities, conceded to the normalization plan with LG Group’s pledge to take part in the debt burden.

Meanwhile, British credit rating agency Fitch IBCA analyzed the rescue plan saying, “Tax payers could suffer a potential loss and the banks which have been careful in supporting LG Card will suffer additional loss.”