Court Receivership to Be Placed on Jinro

Jinro Co., Ltd, a leading Korean distiller of soju, will be placed under court receivership. The company has been in conciliation proceedings for some time now.

Seoul District Court‘s insolvency department, presided by Judge Byon, Dong-gul, permitted the petition for initiating the liquidation process of Jinro and for court receivership yesterday. The petition was filed on April 4 by creditor, Goldman Sachs. Former project manager at Hyundai Asan’s Kaesong industrial complex Lee Won was appointed court receivership supervisor of Jinro.

Yesterday‘s court ruling is the first case in which a foreign creditor filed for court receivership against a local business and won the court’s approval. This also is the third case in which a creditor‘s petition was permitted since the Kia Motors and Peom-yang Shipping cases.

“Jinro acknowledges the fact that it cannot repay its debt as promised in the conciliation proceeding,” said the bench during the ruling, explaining that “even if Jinro successfully attracts foreign investment, it won`t be able to pay back its remaining debt. In this vein, continuing the conciliation will not be seen as favoring the creditor. Under this consideration the judgment was made.”

The bench also added that “today`s court ruling of curt receivership does not imply that Jinro will fall into the hands of foreign creditors. Instead, the ruling was made to help Jinro rebuild itself in a rigid and transparent way and to maximize the company`s value.”

Jinro, in response to the ruling, said that “it is hard to understand a ruling that is opposed by a majority of creditors,” showing its willingness to file an objection to the ruling.

Goldman Sachs, meanwhile, welcomed the ruling and said that “the ruling was fair not only for creditors but for the company itself and its management and employees.”

By the end of last year, Jinro has repaid a total of 959.9 billion won since February 1998, when procedures of composition were ordered. However, there is still 1.72 trillion won in outstanding debt because most of the repaid money was interest. Jinro, which is still burdened with interest payments, has not posted either ordinary income or net profit although it has recorded about 100 billion won in operating income every year for the past five years.

Jinro`s labor union opposed the court`s ruling and has been going on strike since yesterday.

Jin-Hup Song Tae-Hoon Lee jinhup@donga.com jefflee@donga.com