Daewoo Logistics Corp. (“Daewoo”), a South Korean shipping, warehousing and logistics-services company, initiated a bankruptcy proceeding under Chapter 15 of the U.S. Bankruptcy Code on September 15, 2009 in the United States Bankruptcy Court for the Southern District of New York (“U.S. Bankruptcy Case”). The U.S. Bankruptcy Case has been assigned to Judge Burton Lifland as case number 09-15558. Chapter 15 of the U.S. Bankruptcy Code governs the relationship between U.S. bankruptcy laws, on the one hand, and the bankruptcy and insolvency laws of other sovereign nations, on the other, including administration by U.S. bankruptcy courts of matters that are ancillary to bankruptcy cases pending in foreign countries.
The petition seeks recognition – under U.S. law – of Daewoo’s Korean reorganization proceeding that was commenced under Korean bankruptcy laws in July of 2009 (“Korean Bankruptcy Proceeding”). According to the affidavit of Chi Yong Rim (Daewoo’s Korean bankruptcy counsel) filed in the U.S. Bankruptcy Case:
- Daewoo is organized under the laws of the Republic of Korea (“ROK”);
- the Korean Bankruptcy Proceeding was commenced on July 3, 2009 seeking “rehabilitation” of Daewoo as an alternative to liquidation under ROK law; and
- a receiver having authority to manage the assets of Daewoo in the Korean Bankruptcy Proceeding was appointed on July 27, 2009.
The Chi Yong Rim affidavit and an affidavit of the receiver further state that certain of Daewoo’s creditors have commenced collection litigation in the U.S. against Daewoo and its assets, including thirteen admiralty proceedings adversely affecting Daewoo’s shipping vessels in New York and in cities on the U.S. gulf coast and west coast. The affidavits further state that Daewoo’s creditors have seized, and have threatened to seize, other Daewoo assets in the U.S.
The Chi Yong Rim affidavit further sets out an English translation of pertinent parts of the ROK bankruptcy laws, summarizing the procedures that Daewoo’s creditors are required to follow under the laws of the ROK in the Korean Bankruptcy Proceeding (“Korean Claims Process”).
The petition in the U.S. Bankruptcy Case seeks recognition and ancillary enforcement of the Korean Bankruptcy Proceeding, including enforcement of the Korean Claims Process. Further, by an ex parte motion filed in the U.S. Bankruptcy Case, Daewoo seeks injunctive relief prohibiting further creditor action outside of the Korean Claims Process or otherwise not permitted in the Korean Bankruptcy Proceeding. More specifically, the receiver seeks relief in the U.S. Bankruptcy Case to prohibit parties from commencing or initiating litigation against Daewoo or taking steps to enforce judgments or execute against Daewoo’s assets, as well as additional assistance needed to facilitate the orderly administration of Daewoo’s assets in the Korean Bankruptcy Proceeding.
On September 17, 2009 Judge Lifland entered an order requiring any parties in interest to show cause why a preliminary injunction should not be granted to Daewoo enjoining any creditor action against Daewoo and its assets at a hearing to be held on September 24, 2009. Judge Lifland further ordered that, pending such hearing, all creditor action against Daewoo and its assets is temporarily stayed and enjoined.
Schedules filed in the Korean Bankruptcy Proceeding state that Daewoo sustained operating losses for each of the twelve-month periods ending March 2008 and March 2009. Daewoo’s voluntary petition estimates it has between 1,000 and 5,000 creditors, between $100 million and $500 million in total assets and between $100 million and $500 million in total liabilities.