Local and Foreign Creditors at Odds over Jinro`s Future

There is a growing conflict between Korean financial institutions and foreign creditors over Jinro`s application for a court receivership. An official from Jinro`s creditors said Sunday, “We will vote against Jinro`s filing for a court receivership at a creditors` meeting on Tuesday or Wednesday.” This move came after Sena Investments, one of Jinro`s creditors and subsidiaries of Goldman Sachs, suddenly filed for a court receivership of Jinro on March 3.

“Sena purchased Jinro`s bonds at 20% of face value in 1998 when the company underwent the management crisis,” the official said. “Sena filed for Jinro`s court receivership to collect their own money without consulting with other creditors as the condition gets better,” he criticized.

“If the company, currently under composition, enters a court receivership, the normalization of management will be difficult, so other banks will have trouble collecting money,” the official pointed out. “Filing for a court receivership by Sena is contrary to business morals.”

“Sena Investments has been standing on the way of normalizing the management. It prevented Jinro from selling its Japanese factory, by sequestering Jinro`s Japanese trademarks. It also filed for a bankruptcy of Jinro`s Hong Kong company and thus dealt a huge blow to the sales in China. Moreover, it disagreed with the selling of Jinro`s headquarters and the negotiations broke down,” said Vice Chairman Kim Jae-rok at Investment Capital, an investment company participating in securing foreign investment for Jinro, along with Samsung Securities and CSFB, a leading global investment banking and financial services firm.

Regarding this, Sena Investments announced that it filed for a court receivership because Jinro have not paid for the debts by March 31st, the date of maturity, and the proposals recently submitted to creditors are far from being practical and transparent. In other words, the company is arguing that it is natural to make efforts to collect money.

Sena Investments purchased Jinro`s unsecured bonds of 87 billion won at 20% of its face value from Korea Asset Management Corporation (KAMCO) in 1998, accounting for 5.6% of Jinro`s total bonds. It also has the guaranteed bonds of 95 billion won.

Jinro negotiated with Sena Investments to redeem unsecured bonds at the end of 1999. The negotiation, however, was known to have broken down when the latter requested for 90% of the face value while the former insisted 40%.

Chan-Sun Hong hcs@donga.com