State-run Korea Development Bank (KDB) said on Monday it would replace the management of LG Card Co soon after leading a $4.5 billion rescue of the company, the country's largest credit card issuer.
KDB stepped in to hold the bail-out together with a late-night offer on Friday to shoulder any additional losses at LG Card, saving the company from bankruptcy and averting a wider financial crisis.
In the first step to preparing the company for sale in a year's time, a task force set up by creditors will search for a chief executive to replace LG Card President and CEO Lee Chong-suk, said Nam Ki-hyon of KDB, who is in charge of restructuring LG Card.
The new chief executive will be able to replace other LG Card officials.
"We plan to take on management of LG Card for one year," Nam said.
After stabilising the company, the state-run lender would sell the credit card issuer to a third party in an auction to either a domestic or foreign buyer, he added.
In addition, creditors will convert 3.65 trillion won ($3.09 billion) in debt owed by LG Card - including a fresh 1.65 trillion won in loans to be provided soon - into equity within one year, he said. That will give 10 creditor banks a combined stake of 90.4 percent in LG, including a 25 percent stake for KDB.
LG Card resumed cash advance services on Saturday after a two-day halt, after creditors provided 800 billion won in emergency loans from four banks.
A third of South Koreans are customers to LG Card, the biggest casualty of a credit boom that has left one in 10 South Koreans above the age of 15 unable to repay debt. Customers were split over their confidence in the company.
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