Loan guarantee is a promise that a guarantor firm, in lieu of the debtorfirm, would pay for the portion of debt which would not be honored by adebtor firm. Then, what happens to the loan guarantee if the guarantor firmherself rather than the guaranteed firm becomes financially distressed? Thispaper extends put option approaches to valuing loan guarantee by Jones andMason (1980), Merton (1977), and Sosin (1980). Each case of full guarantee,proportional partial guarantee, and capped partial guarantee is covered. Thesuggested extension of pricing loan guarantee would prove useful incoordinating interests of many different classes of claim holders if guarantorfirms filed for bankruptcy procedures. Case of Kia Motors which filed forbankruptcy procedure in Oct. 1997 is briefly discussed.