Pantech Gets Temporary Debt Reprieve

Under the outline of a debt-rescheduling program created by creditors, a manufacturing creditor has agreed to extend the maturity of Pantech commercial paper worth five billion won.

It is the first time that a company holding Pantech commercial paper has agreed to an extension of maturity since the firm’s corporate debt restructuring began.

If other creditors follow suit, taking the example of this manufacturer into account, the debt workout program may pick up steam.

On December 19, an individual creditor postponed the payback of two billion won in commercial paper.

Turning the Corner-

As commercial paper worth five billion won comes due on December 28, it was confirmed on Wednesday that the company would issue new commercial paper in the same amount (a conversion issue), instead of coming up with the cash.

Now, the company can postpone its repayment until a new maturity date. If it were not for rescheduling work, companies that fail to pay back go bankrupt.

The creditor banks, including Korea Development Bank, Woori Bank, and Hana Bank, had concerns that the rescheduling work might have fallen through because of commercial paper held by companies and individuals. Under the voluntary management pact concluded by creditors on December 15, the debt relief will be canceled if Pantech pays the debt circulated by non-bank establishments.

The pact was designed to avoid the situation that only creditor banks can not collect debt, but the company was not able to respond to demands to repay.

The Pantech Group’s paper debts amount to 160.6 billion won, due the first half of next year.

Creditors cannot Extend Maturity Forever-

It is hard to expect the delay of debt redemption forever, even if creditors agree on a temporary extension.

A finance official of the creditor manufacturer said, “I thought we could collect the debt this time, but we just agreed to a conversion issue because we did not conduct due diligence yet.” This remark can be translated that next time another extension of maturity may not be feasible.

Some say that the decision will come as heavy burden to the company since it will confine the utilization of current assets.

“If unexpected variables come out or creditors face financial troubles during the process of due diligence, creditors might rush to collect the debt. In this situation, workout of Pantech will not be possible.”

An official of Pantech Group said “we plan to invite corporate and individual creditors holding commercial papers next January and persuade them to prolong the maturity of CPs.”

On December 28, the group will issue the announcement of summoning creditors with commercial papers.

legman@donga.com