Hynix.
Korea Exchange Bank, which was a major creditor of Hynix, transformed from mixed
to foreign bank. Korea Exchange Bank had been a mixed bank since Commerbank,
German bank, invested 350 billion won in 1998 and owned 31.6 percent of total assets.
Now it is a foreign bank because it attract the new capital investment about one trillion won
from the Lone Star in Oct., 2003. Its standing on the Hynix has changed right after it
becomes a foreign bank. New President of Korea Exchange Bank, Robert Fallon, has
proposed that creditors sell down up to 20 percent of their stake in Hynix Semiconductor
Inc.
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Another financial problem Korea has faced is the LG Card bailout. LG Card, the
nation’s No. 1 credit card company, which faced cash flow problems last year, is expected
to post around 1 trillion in net losses this year. The nation's eight credit card companies
saw their combined deficit snowball to a record high of 10 trillion won last year, due
mainly to soaring credit delinquency caused by the prolonged economic slump (Chosun
Daily, Mar. 9, 2004). Analysts have a skeptical view on a swift turnaround of earnings
and rising default rates because the problem resulted from card firms’ reckless card
issuance and poor credit evaluation system. In a desperate bid to prevent another round of
credit card crisis, the government plans to set up a so-called bad bank to dispose of soured
loans at local financial companies, including credit card firms.
Creditors of LG Card are deliberating to outline a new rescue plan for the beleaguered
card issuer that would rule out two foreign-owned banks that were part of the initial
agreement. Creditors discussed how to redistribute the 5 trillion won bailout of the LG
card agreed in this January after the board of Korea Exchange Bank, 51-percent owned by
U.S. equity fund Lone Star, pulled out from the deal, reneging on its 117.1 billion won
commitment. Meanwhile, KorAm Bank, 36.7-percent owned by U.S.-based Carlyle
Group and J.P. Morgan (now owned by Citigroup) agreed to supply 33.4 billion won in new
loans but would not participate in a debt-for-equity swap. Other creditors, such as Hana
Bank, Kookmin Bankand Shinhan Bank, were expressing their opposition to the exclusion
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Creditors including KEB hold a combined 81.4 percent stake in Hynix and are banned from
selling their holdings until December 2006 as part of a bailout.
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Convention