[EDITORIALS]LG Group should step upThe insolvency of LG Card has resurfaced after a year. The credit card business will be driven toward bankruptcy if an additional capital increase of 1.2 trillion won ($1.1billion) is not made by year end.
The creditors demand that LG Group, the previous owner of the card company, participate in a financial salvage package, but the group is making clear that it has no intention of doing so. Although there still exists the possibility of a last-minute compromise between creditors and the group, it is difficult to foresee the result because both sides are stubbornly sticking to their positions.
If negotiations fail, LG Card would enter liquidation. In that case, not only would creditor banks and LG Group suffer huge financial losses, LG Card holders and member stores would also face severe damage. The whole financial sector could be destabilized.
We think the responsibility for making the LG Card problem grow so large rests with the government and the creditor banks.
Of course, it was LG Group that was responsible for causing the original insolvency of LG Card.
But the group paid its share in January according to the plan to rescue the card company.
In this sense, the responsibility for bringing about another bankruptcy crisis in less than a year rests more with the creditors, who developed a poorly-conceived rescue plan, and the government that controlled the circumstances from behind the scenes.
However, it is not proper for LG Group to look on indifferently at the card company’s ongoing crisis simply because it has met its commitments. The group insists that the creditor banks’ and the government’s demand that it shoulder additional financial burden is against market principles. But financial experts are of the opinion that LG must share the responsibility of reviving the card company.
Although LG was exempted from its responsibility as a major shareholder, it must take its responsibility as a major creditor.
If LG Card is liquidated, it will be LG Group that will be hurt most. Nevertheless, it appears that LG is ignoring the demands of the creditors, calculating it can take profits later after handing the financial burden of reviving LG Card to creditor banks.
LG Group must show an attitude of fulfilling its responsibility under market principles.