Pantech Files for Debt Workout Again

Korea's third-largest smartphone maker Pantech has filed yet again for a debt-workout program. Pantech said Tuesday that it has applied for a debt workout with its main creditor, Korea Development Bank, in order to radically improve its financial structure and come up with a long-term survival plan.

The firm says it took preemptive steps to address its financial straits because it does not have the capital reserves to remain competitive.

The reason is changing conditions in the domestic and global smartphone markets. In the first three quarters of last year, Pantech posted operating losses of W245.4 billion on revenues of W1.08 trillion (US$1=W1,074). Third-quarter losses of W192.3 billion in particular were too heavy for the company to handle.

This led to the resignation of Pantech founder and vice chairman Park Byeong-yeop in September, who said that he felt "too ashamed" to sit at his desk at a time when a third, or 800 of the company's workforce were forced to take unpaid leave.

Due to the restructuring, Pantech reduced its losses in the fourth quarter to one-fourth of the previous quarter's. A company spokesman said its debt load last year was less than W300 billion. "We posted a small operating profit in January and will not see losses in February."

But the firm is not confident about a full-fledged recovery.

Pantech's troubles are likely to create a ripple effect for around 2,000 parts suppliers. If the smartphone maker goes bankrupt, they will be hit hard. And since some of them also supply components to Samsung and LG, the effects would be felt across the Korean smartphone industry.

There is a chance that Pantech could be acquired by a domestic or Chinese rival. Park said, "If a Chinese company acquires Pantech, it could emerge as a major player in the global market."