Jinro, South Korea's largest spirit producer, has confirmed that it will invite bids by the end of this month, a move that aims to raise $2 billion (€1.5 bn) and allow the bankrupt company to pay off its creditors. Simon Pitman reports.
The company has finally got the auction process off the ground following 18 months of legal battles. The auction aims to raise enough funds to pay off debts totalling $1.4 billion, owed to creditors such as Goldman Sachs and Taihan Electric Wire company. Goldman Sachs is said to be owed somewhere in the region of $500 million, which it lent to the company to try and bail it out of financial problems that began during the economic downturn in 1997. Goldman Sach's, together with Merrill Lynch, are also joint advisers on the sale.
Industry and economic experts see the sale of the country's leading manufacturer of the rice-based alcoholic drink, soju, as a primary test of investors' faith in the volatile South Korean economy. Although a number of bidders - both domestic and international - have shown interest, they will not know the full extent of the company's current financial situation.
This means that the actual sale will not be completed until the second half of next year.
Speculation is rife over who is entering the bidding, but an FT report says that those close to the auction process have indicated domestic conglomerates such as consumer giant Lotte Group and the Doosan Corp are in the running. Taihan Electric Wire is also said to be making serious enquiries.
International interest has been shown by Japanese drinks companies such as Kirin and Asahi, who are looking to capitalize on the strength of the Jinro soju brand.
Jinro is a leading producer of soju, a favourite tipple for South Koreans that is traditionally made from rice and barely. It is a relatively low alcohol content for a spirit and is said to have a very subtle flavour comparable to that of vodka. Currently Jinro controls around 55 per cent of that market.
Athough the company reported a KRW 527 million (€380,000) profit for 2003, its financial troubles stem from the 1997/98 economic downturn, which came at a time when the company had just undergone a rapid expansion into the non liquor business. The company's ongoing debt is now running at €1.15 billion.