Banks take LG Card to brink in war with LG

After LG Group said Monday it would refuse to join in a rescue, the lead creditors, including the state-run Korea Development Bank and Woori Bank, met yesterday morning to discuss countermeasures.
The creditors are also seeking government mediation to settle their conflict with LG Group.
The lenders have been demanding that the LG Group either bear more than half of a 1.2 trillion won ($1.1 billion) debt-for-equity swap to aid LG Card or sell its debt in the card company for 260 billion won ¯ the value that the conglomerate would collect if the card company were liquidated.
"Though we offered the LG Group a debt-for-equity swap of a lower value than the 770 billion won that we had formerly proposed, the new offer was not accepted either," Yoo Ji-chang, governor of Korea Development Bank, the main creditor, said after the meeting.
According to a creditor official, the lenders' latest offer was a 670 billion won debt-for-stock exchange.
"Unless the LG Group selects one alternative ¯ participation in the debt-for-equity swap or debt sale at a discount ¯ by Dec. 29, we will apply strong financial sanctions against the group," he said.
Asked what the sanctions might be, he said, "It is very clear what measures commercial banks can take," suggesting that the sanctions would be restrictions on loans to LG affiliates.
Mr. Yoo added, "We will officially ask the government to mediate to normalize the business of LG Card and to stabilize the nation's financial markets."
The lenders emphasized that LG Card needs more funds by the end of the year to avoid being delisted from the Korea Stock Exchange.
"If the board of directors fails to vote on an equity capital increase at a meeting on Dec. 29 (due to the LG Group's refusal to join it), the holders of the card company's bonds will no longer extend the maturities, sending the firm into bankruptcy," Mr. Yoo said.
The LG Group said in a statement yesterday, "The debt-for-equity swap should be shared by all interested parties using fair and rational standards. For that, we have asked opinions from legal and accounting experts."

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