Jinro's Tonic
May 2005, FinanceAsia
By Steven Irvine

White & Case advised Goldman Sachs in a landmark bankruptcy court battle in Asia involving leading Korean liquor-maker Jinro Ltd. 

First, in a highly technical legal issue, White & Case successfully established that Goldman Sachs, which had purchased Jinro bonds, was in fact a creditor of Jinro (Hong Kong), an affiliate that owned the company’s Japanese soju liquor business.

White & Case then advised Goldman to press for Jinro (Hong Kong) to be moved into provisional liquidation - a preservative measure that can be used as quasi-restructuring process - rather than into liquidation. Despite difficult complications, this strategy was also successful.

The move to put the company into provisional liquidation was complicated because most assets of Jinro (Hong Kong) were in Japan. However, Japan had recently passed the Acknowledgment and Assistance of Foreign Proceedings Act. The law instructs Japanese courts to recognize foreign insolvency practitioners - such as those appointed in Hong Kong. White & Case’s representation of Goldman in the Jinro case was the first time this law was tested in the Tokyo Bankruptcy Court.

White & Case also was asked to find a solution to a critical issue of ensuring that any acquirer of Jinro would also gain full control of the Japanese assets. The firm came up with a solution by which a vehicle was created in Ireland, which had a double taxation treaty with Korea, which would allow Hong Kong bondholders with proper distribution from Jinro’s sale. That resulted in a resolution of a dispute over ownership and cleared the way for a sale of the Korean company, which Goldman Sachs has reportedly said has a value of $3.6 billion. The restructuring of Jinco has resulted in the first sale of a large Korean company through a competitive, international auction. It is expected that Jinro will be acquired by Hite Brewery Co., Korea’s No. 1 brewer, which has said it intends to sign a deal this month.