LG Group to Swap Maximum of 264.3 billion Won In Debt For Equity Trade

LG Group and LG Card Co.’s creditors continued standing face-to-face with each other on Wednesday over their allotment for swapping the cash-strapped company ‘s debt for equity.

LG Group provided creditors with the standard and the volume of the allotment in their debt-for-equity swap on Wednesday, which it had asked outside legal and accounting experts to offer.

According to the standard, LG Group is to sell its LG Card debt for 264.3 billion won, which is much less than the creditors’ offer of more than 670 billion won.

As to the LG Group’s offer, Yoo Ji-chang, governor of main creditor Korea Development Bank, said, “There is no need to take into consideration the amount,” which shows a tough road ahead for reaching an agreement. Since both sides have shown their intension to keep negotiating with each other, there is possibility that they will dramatically reach a deal in accordance with the outcome of negotiations.

LG Group offered two options. The first was that the creditors cover one trillion and 15.2 billion to 1.02 trillion won, with LG Group covering 180 billion to 184.8 billion won based on the amount of loss in case of liquidation, raising a total of 1.2 trillion won in capital for LG Card.

The other option is that the creditors provide 664 billion to 688.4 billion won, with LG Group offering 239.9 billion to 264.3 billion won based on a possible increase in economic value that the creditors and LG Group would enjoy as a result of the debt-for-equity trade.

An official from the creditors said, “It is an unprecedented logic that has never been applied to a corporate restructuring. LG Group is heading towards the liquidation of LG Card.”

Keuk-In Bae Suk-Ho Shin bae2150@donga.com kyle@donga.com