Destiny of Debt-ridden Pantech to be Determined Very Soon

Previously, experts raised the possibility of Pantech’s debt restructuring due to its aggravated financial structure and a lack of liquidity resulting from its poor performance. The destiny of the debt-ridden handset maker is going to be decided very soon. 

According to industry sources on Feb. 18, creditors such as Korea Development Bank are scheduled to hold a shareholder meeting on Feb. 20 to discuss measures to normalize management, including additional liquidity injection, debt workout plans, and court receivership. 

A source in the financial industry said, “Pantech tried to attract capital by targeting investors at home and abroad, but met with little success,” adding, “To the best of my knowledge, creditors are going to reach an agreement within the week about ways to normalize Pantech, including an extra cash injection.” Another source commented, “As far as I know, creditors will determine sooner or later whether or not they will rescue Pantech through additional capital injection, or let the troubled company file for a rehabilitation proceeding.”

Korea’s third-largest smartphone maker filed for a debt workout program, owing to its financial deterioration, in April 2007. However, the firm was able to end the four-year and eight-month debt restructuring program in December 2011, helped by a major restructuring of the business and continual profits for 17 quarters in a row. Nonetheless, the company again started to post losses in the third quarter of 2012, and it encountered financial difficulties. Due to the firm’s poor performance, Park Byeong-yeop, founder and vice chairman of Pantech, resigned from the position in Sept. 2013.

The cash-strapped company is again undertaking intensive restructuring of its business by having 800 workers take unpaid time off and discontinuing its overseas smartphone business, without much success. Moreover, the fact that the firm cannot unleash aggressive sales campaigns because of insufficient liquidity is the major sticking point for the company’s recovery. In fact, the Korean company’s liquid assets amounted to 1.487 trillion won (US$1.387 billion) in 2011, but only 565.1 billion won (US$527 million) in the third quarter of last year. Among liquid assets in Q3 2013, cashable assets totaled merely 36.6 billion won (US$34.1 million).