Pantech is a South Korea’s third largest smartphone manufacturer, following Samsung and LG. According to Garner, as close back as 2012, Pantech was the second best-selling handset maker in South Korean. Pantech is known for selling budget-friendly smartphones in their own domestic market, although a few have made their way over to Verizon and AT&T. Pantech is suffering from immense debt and was on the brink of bankruptcy. A group of their creditors agreed to extend their deadline for repayment another two years in the form of an interest-free grace period until July 25, 2016.
Pantech pleaded, “Please help us. Without your support, Pantech has no option but to declare bankruptcy.” However, their main bondholders and the carriers SK Telecom, KT and LG Uplus remain skeptical if Pantech will be able to turn themselves around. A KT official stated in a phone interview with our source, “No additional financial support is expected. Pantech still wants carriers to sign product purchase guarantees. But it’s difficult to agree to that request, in consideration of the challenging market conditions.” This becomes a catch 22 for Pantech – without sales agreements, they sell no phones, but the buyers are naturally reluctant to enter into agreements that may not be fulfilled. The local carriers already have about 500,000 units of unsold Pantech devices sitting in their warehouses. Pantech is asking the carriers to commit to purchasing another 130,000 more of its Vega tablets and smartphones to help offset their certain losses this year.
Early on Sunday, Pantech’s top three creditors notified Pantech of their decision to extend the workout program, but a Korea Development Bank (KDB) official said “There won’t be additional help for Pantech.” A Pantech official said, “Pantech is getting a little bit of breathing room. But we still have huge hurdles that need to be addressed. Without help from the carriers and creditor banks, we will have no option but to declare bankruptcy.”
There had been previous interest in a buyout as both India’s Micromax and China’s Lenovo Group had both expressed a possibility of purchasing the company, but with Pantech’s financial status, no deal could be reached. Samsung and U.S. company, Qualcomm each hold a 10-perceent share and may be looking for an “exit strategy” of their own.
An official from LG Uplus said, “While Pantech is getting one last lifeline, the handset vendor may declare bankruptcy even within the grace period. That means foreign handset makers will get a chance to enter the highly competitive local handset market.” Pantech will be under close scrutiny in these next few months to see what they can do to turn their failing company into profitability once again. Their creditors are certainly going the extra mile to give them a fighting chance.