Creditors begin bailing out Pantech

Rescue operations for Pantech & Curitel and its affiliate Pantech Co. got underway yesterday, as creditors reached a settlement on how to handle investors’ losses stemming from the debt resolution process.
Under the debt rescheduling, main creditor Korea Development Bank and others have deferred repayment of outstanding debt until 2011, and will issue 120 billion won ($129.1 million) in fresh loans for the beleaguered companies. Creditors will also swap 455.8 billion won of the companies’ debt for new equity.
Pantech & Curitel will cancel 29 out of every 30 outstanding shares, slashing its capital 97 percent. Pantech will remove 19 out of every 20 outstanding shares. The reduction process could finish by May 10.
Also, the sale of the companies’ new headquarters in Sangam-dong, western Seoul, could generate up to 160 billion won. Han Dai-woo, general manager of the corporate restructuring department at Korea Development Bank, told reporters yesterday that 80 billion won from the sale could be used to operate the companies, while the rest will be returned to the bank.
While he didn’t give a specific timetable for the Pantech companies’ turnaround, Han said once they do, the creditors will seek mergers and acquisitions to further stabilize the companies’ operations.
The start of the debt rescheduling had been delayed for several weeks, as Korea Development Bank and other creditors had been at odds over managing the Pantech companies’ short-term corporate bonds.
Individual customers of Woori Bank and the National Agriculture Cooperative Federation, or Nonghyup, had purchased 100 billion won worth of Pantech bonds. Korea Development had demanded Woori and Nonghyup obtain investor approval for debt rescheduling before the process could begin, even if it meant promising them compensation for losses from the rescheduling.
Both Woori and Nonghyup countered that no financial company should be held accountable for losses caused by investor choice. Ultimately the two gathered permission from investors.
Pantech & Curitel reported a loss of 611.3 billion won in 2006 as competition drove down cell phone prices. Pantech posted a loss of 432.1 billion won, the biggest since the company listed its stock in 1997.

By Yoo Jee-ho Staff Writer [jeeho@joongang.co.kr]