End of the Line

 

The prototypical Korean venture success story has collapsed. In the end, Pantech failed to find new viable investors to take over the company after several attempts. Accordingly, the company asked a local court to end its receivership on May 26 and will enter the liquidation process.

Its founder, Park Byeong-yeop, established Pantech in 1991. As the company was once the second best selling handset maker in the country, it was called “the myth of the salaryman.” However, Pantech went into receivership and will go through liquidation in the end.

The company was rescued and put under a workout program in 2007 due to a liquidity crisis. Then, Pantech ended its workout program with intensive restructuring after 4 years and 8 months in 2011. However, its financial footing weakened and was put under another workout program again, as it struggled with falling sales from increased competition in the smartphone market dominated by giants like Samsung Electronics and Apple.

Since then, the company carried out open sales to seek out a new owner, but failed to do so. As the third attempt failed in April, its 1,470 employees signed a resolution letter to accept hardship for the company’s survival. However, it will leave a huge blow in the market as the once venture legend faces liquidation.

Pantech asked the court to end its receivership, so it has only a month left. After the court accepts the application within the next 15 days, it will gather opinions from parties of interest for the next two weeks. If a possible buyer shows up in a month, the situation can change. However, industry sources expect that the company will go into liquidation.

If the court accepts Pantech's call, the handset maker will face liquidation. Once the liquidation order is issued, Pantech's creditors will share the tangible and intellectual assets of the company according to related rules. According to data from the Financial Supervisory Service, Pantech’s total assets reached 268.3 billion won (US$242.52 million), while its total debt recorded 996.2 billion won (US$900.48 million) as of Dec. 31 last year. After the liquidation, the court will sell Pantech’s tangible assets and distribute it to its creditors according to order of priority.

Accordingly, Pantech’s liquidation will bring its 500 parts suppliers and 80,000 employees to the edge of a crisis. After Pantech filed for court receivership in August, more than half of the cooperative firms were already driven out of business or decided to shut down. So, its liquidation could cause a chain reaction of bankruptcies. Moreover, there is also the possibility that these cooperative firms would not be able to receive payment of liquidation, since they are pushed back on the priority list.

An official from the industry said, “Until now, Pantech has developed hardware and software technologies related to ICT through aggressive investment in R&D, and made efforts to nurture talent. If Pantech disappears, the opportunities also disappear to hire excellent research manpower and provide a high-quality research environment. It will have a greatly adverse effect on national competitiveness.” Pantech’s technologies are also expected to come to nothing. The company has 4,099 registered patents and 14,810 patents pending as of the first quarter.

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