Creditors of South Korea's LG Card Co are pushing the former parent group to shoulder the bulk of a proposed 1.2 trillion won ($1.12 billion) bailout of the credit card company, a creditor official said on Tuesday.
Korea Development Bank (KDB) and other lenders had told LG Group they wanted it, via its affiliates and owning family, to pay most of the sum by swapping LG Card debt securities the group owned into equity, said a KDB official, who declined to be identified.
A public relations official at LG Group said the company was unlikely to pay that much, but refused to confirm if state-run KDB had officially made such a request.
"Part of 1.175 trillion won debt LG Card owes to LG Group is held by the group's holding companies and thus cannot be swapped into equities," said the KDB official in charge of the matter.
But the official said 875 billion won of the total might be swapped into equity.
The LG Group official said it would be difficult for the company's affiliates that owned the credit card firm's debt to swap it into equity because LG Card was no longer an LG Group affiliate. LG Card was spun off from the group after an earlier bailout.
"Realistically, it's hard to get board approvals for such a plan," said the official, who declined to be named.
LG Card, South Korea's largest credit card firm, hopes to get the additional capital injection by the end of this year to avoid delisting from the stock market, on top of a $4.5 billion bailout that saved the firm from bankruptcy in January.
LG Card is the biggest victim of a soured consumer credit bubble that left millions of South Koreans bankrupt. The card issuer turned around in September to see its first monthly profits in 22 months, but is set to report a 2004 recurring loss of 900 billion to 1 trillion won.
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