Business Case Studies, Govenrment and Business Environment Case Study, LG Card Company, Bailout

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Case Title:

Bailout of LG Card Company

Publication Year : 2004

Authors: Anand C Prasad, G Srikanth

Industry: Banking, Insurance and Financial Services

Region:South Korea

Case Code: GBE0013

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
Since 1999, South Korea had been encouraging the usage of credit cards in order to improve tax collections and also to achieve a rapid economic growth. LG Card Company took advantage of the favourable environment and pursued aggressive marketing and financing policies. However, financial leverage turned out to be a double-edged sword – good in good times and very bad in bad times. Rising credit card delinquencies coupled with a slowdown in economic growth did the undoing for credit card companies in general and LG Card company in particular. The company had a shy with bankruptcy twice but was saved due to government intervention.

Pedagogical Objectives:

  • To discuss whether the Korean government’s action was justified and whether the LG Card bailout is a financially prudent decision.

Keywords : Bailout of LG (Lucky Goldstar) credit card company; Financial leverage; Lucky Goldstar (LG) company; Bankruptcy; Credit card market; Asset backed securities; Financial supervisory service; Net interest spread; Household debt; BC card; Kookmin card; Managing in Troubled Times Case Study; Samsung card; Delinquency; Korean Development Bank, Woori Bank; Kim Jin Pyo and Lee Duk Hoon

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