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LG Group Refused to Bail Out LG Card Co.

Posted December. 27, 2004 22:57,   


LG Group refused to accept the proposal of a 670 billion won debt-for-equity swap plan by LG Card creditors on December 27. Upon this refusal, creditors of LG Card Co. emphasized their stance, saying, “We are so disappointed by the LG Group’s decision. If the group does not accept our proposal, LG Card will be inevitably liquidated.”

The creditors lowered the debt-for-equity plan’s swap size from 770 in response to the LG Group’s refusal of its proposal last week, which is the second time in a row the size was lowered from 875 billion won the week before.

LG Group Refused an Alternative Proposal-

On the same day, LG Group reported to the state-run Korea Development Bank (KDB) that the group explained to its key affiliates about the new proposal from the creditors of LG Card and asked their stances. However, the affiliates all prevented the LG Group from joining in the aid package, said the LG Group.

“This decision is a very irresponsible one that ignores the predicted loss of small investors and the chaos in the financial market,” said Laah Chong-gyu, executive director at the state-run KDB.

Meanwhile, both sides left possibilities for additional compromise.

A source from the LG Group said, “The refusal means the proposed amount of money by the creditors is too enormous to accept.” And an official from the KDB also emphasized the fact that it would wait for the LG Group’s new stance by tomorrow (December 28).

LG Card Will Be Liquidated if the Capital Increase Does Not Occur-

LG Card, which has been run by the KDB, will hold a shareholders meeting on December 28 and change the articles of incorporation, enabling creditors and the LG Group to join in the capital increase. Then it will pass a resolution shoring up LG Card’s capital at the executive board meeting on December 29.

Executive director Laah explained, “If the executive board can not reach a resolution on the capital increase until December 29, LG Card will be delisted from the stock market, and its credit ranking will stumble.”

Suk-Ho Shin kyle@donga.com