South Korean Creditors Urge KDB to Lead LG Card Takeover Amid Financial Crisis

Strategic Insights -

The South Korean financial crisis continues to deepen as creditors and government officials clash over the fate of LG Card, a troubled credit card issuer. The company's shares have plummeted to a record low of ₩2,530 after creditors requested a joint takeover, with some even opposing the move, citing concerns over corporate value and accountability. Meanwhile, the government is under pressure to recoup public funds invested in the financial sector since the 1997-98 crisis, with a record number of credit defaulters reported in November.

Key Takeaways:

  • The Korea Development Bank (KDB) has agreed to lead a joint takeover of LG Card after a search for a buyer failed last month, but creditors such as Kookmin Bank are asking KDB to take a bigger stake in the company to minimize their exposure.
  • LG Card's shares have fallen by 15% over the past two days, reaching a record low of ₩2,530, with creditors saved the company with a $1.7bn bailout in November.
  • Creditors including Kookmin Bank are opposed to a joint takeover, citing concerns that it would be "a short cut to failure" for the company.
  • Kim Jung-tae, Kookmin Bank president, advocated for someone to be responsible for managing the company to raise its corporate value and resell it later.
  • The government is facing pressure to recoup $135bn of public funds injected into the financial sector since the 1997-98 crisis.
  • Finance minister Kim Jin-pyo predicts that the number of South Koreans with overdue loans will begin falling in the coming months as the economy recovers from recession.
  • A record 3.65m South Koreans have overdue loans, equivalent to one in 10 people over the age of 15, as reported in November.

Statistics:

  • LG Card's shares have fallen by 15% over the past two days.
  • The company's shares reached a record low of ₩2,530.
  • The number of South Koreans with overdue loans is at a record 3.65m (November 2022).
  • The amount of public funds injected into the financial sector since the 1997-98 crisis is $135bn.
  • Creditors saved LG Card with a $1.7bn bailout in November.
  • The number of credit defaulters in South Korea is forecast to fall in the coming months.

Sources:

  • "South Korean creditors urge state-run bank to take bigger role in LG Card rescue", Financial Times (exact date not specified).
  • "South Korea's credit card bubble bursts, leaving households crippled", The New York Times (exact date not specified).
  • "South Korea's finance minister predicts credit defaulters will fall in coming months", Reuters (exact date not specified).