South Korea's largest credit-card issuer, LG Card Co, said customers could withdraw cash again later yesterday after creditors agreed to extend emergency loans, averting a liquidity crunch that threatened South Korea's financial system.
LG Card was forced to suspend cash advances over the weekend because of its liquidity crunch, raising the specter of a spiralling series of defaults as many South Koreans use their credit cards to pay bills and service other credit card debts.
LG Card has 14 million customers, almost a third of South Korea's population.
"We will be able to resume cash-advance services in the afternoon," said a spokesman for LG Card.
Woori Bank and other lenders agreed late on Sunday to provide 2 trillion won (US$1.68 billion) of fresh loans and to roll over LG's outstanding debt for one year, helping avert its insolvency.
But they warned they could write down LG family stakes in LG Card and sell other collateral if the LG Group parent failed to turn around the card firm.
They also said a debt-to-equity swap and a sale of LG Card to strategic investors was possible if trouble persisted.
Analysts said the loans had not resolved LG Card's problems.
"We think this liquidity support package may only be able to stabilize rather than resolve LG Card's liquidity situation," said Philippa Rogers, an analyst at Goldman Sachs. "We think LG Card needs to find a strategic investor."
"Despite the emergency financial aid, the company is at a very critical point," said Park Seok-hyun, an analyst at Kyobo Securities.
The card industry is struggling to cope with the aftermath of a credit boom that has left consumers unable to repay loans and card issuers with piles of bad debt.
"This is a necessary step to not only prevent any bigger turmoil in [the] financial system, but also help out the stabilization of credit-card issuers given a significant squeeze in credit markets for credit cards seen over the recent months," said Yun Seok, analyst at Credit Suisse First Boston.
Credit card firms' problems came to a head in March after an accounting scandal at a conglomerate scared investors off lower-quality securities, making it difficult for card issuers to roll over bonds issued to finance their lending.
South Korean adults carry more than three credit cards each on average, encouraged by government tax breaks aimed at reviving domestic spending and ensuring transparent tax collection.
LG Card had faced a default on its debts because its lenders and its parent LG Group, South Korea's second-largest conglomerate, disagreed over collateral the group had originally offered in return for the bailout.
Already, one won in every nine owed on a credit card was at least one month overdue at the end of August. Overdue loans at eight credit-card firms stood at 8.6 trillion won (US$7.20 billion) at the end of August, 11 percent of total credit card loans.
"I was startled to find I could not use my LG Card to withdraw cash to buy a present for a friend," Jang Eun-ju, a teacher living in a posh neighborhood in southern Seoul. "I won't be carrying that card any more."
WAITING GAME: The US has so far only offered a ‘best rate tariff,’ which officials assume is about 15 percent, the same as Japan, a person familiar with the matter said Taiwan and the US have completed “technical consultations” regarding tariffs and a finalized rate is expected to be released soon, Executive Yuan spokeswoman Michelle Lee (李慧芝) told a news conference yesterday, as a 90-day pause on US President Donald Trump’s “reciprocal” tariffs is set to expire today. The two countries have reached a “certain degree of consensus” on issues such as tariffs, nontariff trade barriers, trade facilitation, supply chain resilience and economic security, Lee said. They also discussed opportunities for cooperation, investment and procurement, she said. A joint statement is still being negotiated and would be released once the US government has made
NEW GEAR: On top of the new Tien Kung IV air defense missiles, the military is expected to place orders for a new combat vehicle next year for delivery in 2028 Mass production of Tien Kung IV (Sky Bow IV) missiles is expected to start next year, with plans to order 122 pods, the Ministry of National Defense’s (MND) latest list of regulated military material showed. The document said that the armed forces would obtain 46 pods of the air defense missiles next year and 76 pods the year after that. The Tien Kung IV is designed to intercept cruise missiles and ballistic missiles to an altitude of 70km, compared with the 60km maximum altitude achieved by the Missile Segment Enhancement variant of PAC-3 systems. A defense source said yesterday that the number of
Authorities have detained three former Taiwan Semiconductor Manufacturing Co (TMSC, 台積電) employees on suspicion of compromising classified technology used in making 2-nanometer chips, the Taiwan High Prosecutors’ Office said yesterday. Prosecutors are holding a former TSMC engineer surnamed Chen (陳) and two recently sacked TSMC engineers, including one person surnamed Wu (吳) in detention with restricted communication, following an investigation launched on July 25, a statement said. The announcement came a day after Nikkei Asia reported on the technology theft in an exclusive story, saying TSMC had fired two workers for contravening data rules on advanced chipmaking technology. Two-nanometer wafers are the most
Taiwanese exports to the US are to be subject to a 20 percent tariff starting on Thursday next week, according to an executive order signed by US President Donald Trump yesterday. The 20 percent levy was the same as the tariffs imposed on Vietnam, Sri Lanka and Bangladesh by Trump. It was higher than the tariffs imposed on Japan, South Korea and the EU (15 percent), as well as those on the Philippines (19 percent). A Taiwan official with knowledge of the matter said it is a "phased" tariff rate, and negotiations would continue. "Once negotiations conclude, Taiwan will obtain a better
RSS