Phone maker VK declared bankrupt
Competition too strong
South Korean handset maker VK has been declared bankrupt after it failed to pay its creditors, local media reports reveal. Trading in the company's shares has been suspend pending a de-listing on 22 July.
According to a number of South Korean newspaper reports today, VK owed its creditors KRW1.78bn ($1.90m). Last week, an official from one of those creditors, the International Bank of Korea (IBK), was quoted as saying VK must put in place a strategy to deal with its debt or face collapse. The warning followed the passing of a deadline to pay back KRW2.8bn ($2.99m) and KRW3.5bn ($3.74m), though VK was apparently able to pay its creditors soon afterward.
Established as a battery manufacturer in 1997, VK started to make mobile phones in 2002. Initial success saw the company able to post sales of almost KRW400bn ($426.84m) in 2004, but cutthroat competition and the expensive purchase of French phone company VMTS took its tool in 2005, leading to a KRW65bn ($69.36m) loss.
VK CEO Yi Cheol-sang today pledged to get the company back on track. Options include receivership or debt restructure deals with VK's creditors. However, the competitive pressures that have caused the company such trouble remain.
Last month, it was rumoured that Motorola had signed a handset design and manufacturing deal with VK, and some analysts see a closer partnership with Motorola or one of the other major vendors as the smaller firm's only chance for long-term survival. ®
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