PacificNet 'Here to Stay' Having Settled with Creditors

PacificNet Inc., a gaming technology company, has settled a dispute with several of its creditors and now hopes to move forward in building the business and regaining the trust of its customers.

The dispute arose last year when the company, based in Hong Kong, defaulted on debenture payments to several of its creditors -- or bondholders -- which resulted in penalties and ultimately an accelerated repayment schedule, Jacob Lakhany, an investor relations representative for PacificNet, explained to IGamingNews by telephone Monday.

Mr. Lakhany said the debt was initially taken out as a fundraising venture to expand the company's gaming operations.

"It was kind of a routine fundraising that, due to some other previous issues, we were unable to make one of our payments on time, which kind of triggered the whole default status and the penalties and so forth," he said.

"The actual penalties and details in that regard were actually disagreed on as far as how much penalties we'd have to pay," Mr. Lakhany continued. "There were disagreements as to when we'd have to pay those things like that. And so it became kind of an ongoing dispute."

In March, the bondholders -- Iroquois Master Fund Ltd.; C.E. Unterberg; Towbin Capital Partners I (now known as Collins Stewart); Alpha Capital A.G.; Whalehaven Capital Fund Ltd.; DKR Soundshore Oasis Holding Fund Ltd.; Basso Fund Ltd.; Basso Multi-Strategy Holding Fund Ltd.; and Basso Private Opportunities Holding Fund Ltd. -- filed a petition for forced Chapter 11 bankruptcy in a federal bankruptcy court in Delaware. The bondholders' claim was that PacificNet was in default for the total amount of $6.2 million.

"Basically, their case contended that since we weren't paying these bills, we weren't paying our bills on time, and made a case to drive our company into bankruptcy, which really wasn't quite the case," Mr. Lakhany said. "We were paying our other bills just fine. It was just more of a dispute, specifically regarding this transaction and how the penalties and interest were calculated."

Since March, the parties have been in negotiations to reach a settlement which would be acceptable to all involved. On Sept. 4, PacificNet announced that it had entered into a settlement agreement with the bondholders to fulfill each payment schedule, including interest, before July 15, 2009.

"Pursuant to the settlement, the bondholders have agreed to drop any legal proceedings if we keep to that payment schedule agreed upon," Mr. Lakhany said.

Looking ahead, Mr. Lakhany acknowledged that the dispute has affected company sales.

"Obviously people really don't want to do business with a company whose stock is going into bankruptcy," he said. "We're very happy to go forward after this.

"Hopefully now we can really show people that we're here to stay; we're not going anywhere," Mr. Lakhany added. "If you liked our product a few months ago hopefully we can revisit a lot of the people who may not have bought from us just because of this issue having been on the table."