Medison exec seeks to dispel possibility of corporate bankruptcy

Recovery plan focuses on ultrasound growth

Korean ultrasound vendor Medison is operating under the control of a receiver appointed by the Korean court system, but a top executive for the firm contends that the change in the company's status has had little effect on day-to-day operations.

"Customers in the U.S. have not experienced any significant change in sales or service as a result of the receivership process," said Medison marketing director Joon Hyeong Park, who previously served two years as CEO of Medison America. "Medison remains committed to providing excellent service and product technology to the U.S. ultrasound community."

Park acknowledged that Medison has defaulted on debt payments (SCAN 1/23/02). On Jan. 28, the company failed to make a $3.6 million loan payment. A $700,000 payment was missed soon after. These failures were the result of a huge debt, incurred by bad investments in the stock market two years ago, that today is a heavy burden on the company.

"However, this doesn't mean that Medison is legally or practically out of business or bankrupted," Park said.

Piqued by media stories that Medison was going bankrupt, Park sought to distinguish receivership under Korean law from bankruptcy in U.S. courts. Korean law, he said, requires companies that default on a debt payment to enter court receivership. A Korean court then examines the company's financial situation, including the value of its assets, and decides the best course for it to take. The receiver takes custody of the property, business, and finances, pending a final decision on disbursement of funds to creditors. During this time, the business operates normally in all other respects, Park said.

"Accordingly, Medison's case is completely different from chapter 9 or 11 in the U.S., which generally means that the company is out of business," he said. "Medison is not heading for bankruptcy, but heading for recovery. Through the process of court receivership, we are seeking to accelerate our financial recovery."

The company's problems are confined to its financial arm, according to Park. Manufacturing, customer service, sales, administration, and human resources are all operating well, he said. Control of the company, however, will not shift back to Medison executives until financial problems are resolved, and there is no telling when that will happen.

The company ran aground as a result of stock investments that went sour. The financial travails, Park said, were not related to its core business in diagnostic ultrasound.

"In recent years, Medison strayed from its core competence and invested heavily in technology start-up companies," he said. "As a result of the significant decrease in the value of technology stocks on the KOSDAQ, Medison incurred large financial losses."

Park contends that past investment errors did not adversely affect the company's ultrasound business. It did, however, influence decisions involving core assets. Park acknowledged, for example, that the sale of Medison's interest in 3D developer Kretztechnik was an attempt to raise funds to help stabilize the financial deficit. He does not expect any untoward effects on its ultrasound business from current efforts to emerge from receivership. On the contrary, the plan to rejuvenate the company focuses on the development of advanced technology, specifically 3D and digital ultrasound, and sales of resulting products through its global sales network.

"Medison has a strong foothold in the ultrasound industry, as it has a very competitive technology in development and manufacturing," he said. "It also has a competitive edge in sales and marketing in most countries around the world.