Creditors agree on debt workout for Pantech, but obstacles remain

Creditors of Pantech Co. and its affiliate Pantech & Curitel Communications Inc. agreed Friday on a debt workout plan for the ailing handset makers, but they are still facing an uphill struggle to get normalized.

Under the agreement, the creditors allowed the two handset manufacturers to delay debt payments by three months and will conduct due diligence to decide whether or not to normalize the handset makers during the period, Korea Development Bank, one of the creditors, said in a brief statement.

However, Friday's agreement wasn't authorized by non-banking financial institutions such as brokerages and insurance companies that also own bonds or notes in Pantech and Pantech & Curitel.

So Pantech, South Korea's third-largest handset maker together with Pantech & Curitel, is trying to get an agreement for the debt workout plan from all creditors. But some analysts say getting it done is a daunting task.

As of the end of November, the non-banking creditors are estimated to hold 656 billion won (US$712 million) in corporate bonds and 161 billion won in promissory notes, out of its total liabilities of 1.5 trillion won.

"Getting consent from the holders of promissory notes is the key to this workout program," an official at one of the creditor banks said on condition of anonymity. "If the note holders or non-banking creditors don't join the workout program, we have no choice but to see Pantech's collapse." Founded in 1991, Pantech was once touted as a model for South Korean start-ups after it emerged as the No. 3 handset manufacturer after Samsung Electronics Co. and LG Electronics Inc.

However, the company was mired in financial troubles after it recklessly purchased a handset-making unit from SK Telecom Co.

last year for 300 billion won.

Pantech's financial status was also aggravated because of a fierce price-cutting competition in the global market. To recover profitability, Pantech shifted its focus to sales of own-brand handsets, but the move failed because the company's brand is virtually unknown in the global market, analysts said.

Last year, Pantech and Pantech & Curitel posted a combined 102 billion won in operating losses on sales of 3.2 trillion won. For the first nine months of this year, the two companies reported a combined 47.2 billion won in operating losses.

Seoul, Dec. 15 (Yonhap News)