Close Shave
Thanks to a decision by SK Telecom, KT, and LG U+ to extend the deadline for debt repayment, Pantech was able to avoid defaulting on debt. However, the debt-ridden company still has a long and winding road ahead.
Pantech managed to extend the maturity period of bonds worth 20 billion won (US$19.4 million) for partner companies that are scheduled to reach maturity on July 25. Around 500 partner companies will be partly paid for commercial bonds in a timely manner, and thus a cascade of bankruptcies were averted.
However, the deferral of debt repayment cannot alone normalize the management of the troubled company. Mobile carriers did not give creditor banks a guarantee of buying the minimum quantity of Pantech phones, which is essential for the smartphone maker's rehabilitation. An official at one of the three carriers remarked, “Creditors' demands that we purchase as much as 150,000 units per month of Pantech phones is unacceptable.” Instead, carriers are going to support the handset maker by promoting Pantech phones, to sell 700,000 formerly-purchased products through retailers and cell phone stores.
With the recent decision, it is now up to creditor banks to revive the company. A measure to normalize the management of Pantech by creditors and a debt workout program on the condition of mobile carriers' agreements on the debt-for-equity swap were scrapped as of July 14. Creditors believe that the three mobile carriers should reconsider the management normalization measure under the premise that carriers will defer debt repayment.
Even if the debt workout program is reinstated, capital injection is unlikely. The most likely help is only an extended deadline for debt repayment or a reduction in interest that is included in the existing management normalization measure. Ultimately, the sales volume of Pantech phones is expected to be a crucial factor in deciding Pantech's destiny in the future.