Pantech Co. and its affiliate Curitel Communications Inc., whose creditors have begun rescheduling their debts amid deteriorating finances, may have no choice but to seek court receivership as the companies' ambitious own-brand strategy has failed and reckless expansion has taken a toll, analysts said Tuesday.
On Monday, the two handset manufacturers said their 11 creditor banks, led by Korea Development Bank, started reorganizing their debts last week, dealing a fresh blow to the country's already-struggling mid-sized handset makers.
The state-run Korea Development Bank said creditors will hold a meeting on Friday to finally decide on whether to start the debt restructuring program for the Pantech Group, South Korea's third-largest handset maker, and plans to announce specific plans about a month later.
However, some analysts said chances are slim for Pantech Group to win approval for the debt workout scheme because all creditors, including institutional investors who own short-term promissory notes and commercial papers, have to agree on the proposed plan.
"As a law on promotion for corporate restructuring expires, Pantech affiliates need 100-percent agreement from all creditors to push for the debt workout plan," said Lee Joon-jae, an analyst at Korea Investment and Securities Co.
"So, it's uncertain whether creditors will start the workout program and Pantech and Curitel may take steps for court receivership in the worst-case scenario," the analyst said.
Pantech and Curitel has a total of 1.9 trillion won (US$2.05 billion) in interest-bearing liabilities with short-term debts exceeding 430 billion won, according to Yuin Yang, a spokeswoman at Pantech Group.
Pantech Group, which has laid off more than a quarter of its employees this year, may soon announce another job-cut plan, the spokeswoman said.
On Tuesday, shares of Pantech and Curitel plunged by the daily limit for the second consecutive day.
Pantech plummeted 15 percent to 1,615 won and Curitel dropped 14.9 percent to 685 won in Seoul.
Founded in 1991 by Park Byeong-yeop, 41, a former pager salesman, Pantech was once touted as a model for South Korean start-ups.
In 2004, Pantech and Curitel posted 89.7 billion won in operating profit on sales of 3 trillion won. At that time, they sold 18 million handsets worldwide.
To focus on high-margin products, Pantech Group, which had focused on selling mobile phones to Motorola Inc. of the U.S. on an original equipment manufacturing basis, decided to promote sales of its own-brand handsets.
Last year, Pantech Group acquired a handset-manufacturing unit from SK Telecom Co., South Korea's top wireless operator, for about 300 billion won.
However, such ambitious management strategies have not succeeded.
In 2005, Pantech Group posted 102 billion won in operating losses on sales of 3.2 trillion won. For the first nine months of this year, Pantech Group reported 47.2 billion won in operating losses.
Seoul, Dec. 12 (Yonhap News)
S. Korea's Pantech, Curitel may seek court receivership, analysts say |
