RE SK GLOBAL HONG KONG LTD

HCCW 776/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 776 OF 2003

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J U D G M E N T

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1. This is an application by SK Global Hong Kong Limited ("the Company") that it be at liberty to withdraw the petition presented for its own winding up on 17 July 2003 and that the provisional liquidators appointed on the same date to be unconditionally released and discharged.

2. The Company is part of the SK group, one of Korea's top five conglomerates. It is a subsidiary of SK Networks Company Limited ("SK Networks"), which is listed on the Korean Stock Exchange.

3. In March 2003, the Korean financial creditors of SK Networks took steps to commence restructuring proceedings in Korea under the Korean Corporate Restructuring Promotion Act and in June 2003, the domestic financial creditors voted in favour of the proposal for restructuring conditional on agreement being reached with the financial creditors of SK Networks and subsidiaries on restructuring of foreign creditors' debts. Judgment was obtained by two of the foreign financial creditors in Hong Kong. The Company's application for stay of execution was not successful. Hence, on 17 July 2003, the Company presented the petition for its own winding up and obtained the appointment of provisional liquidators to ensure that the assets were preserved and made available to all unsecured creditors equally, pending either the successful implementation of the restructuring of the SK group or the liquidation of the Company.

4. The petition first came before me on 1 September 2003. It was adjourned for three months for the provisional liquidators to conduct investigations and explore the merits of restructuring of the Company.

5. Subsequent to the presentation of the petition, SK Networks had reached a number of restructuring agreements. The provisional liquidators were not parties to the negotiations but they have been kept informed of the progress from time to time and copies of the formal agreements have been provided to them.

6. On 15 September 2003, agreement was reached between SK Networks and the foreign financial creditors ("the Exchange Agreement") pursuant to which SK Networks offered to purchase from those creditors their interest in the indebtedness due and owing by its subsidiaries, including the Company, in exchange for promissory notes and bonds with warrants. Pursuant to the Exchange Agreement, fifteen of the Company's foreign financial creditors have agreed to assign to SK Networks their interest in the indebtedness of the Company. Of the remaining foreign financial creditors of the Company, except for three creditors who have agreed to sell their claims to SK Networks, they have agreed to participate in an exchange offer substantially the same as that in the Exchange Agreement.

7. On 27 October 2003, a memorandum of understanding ("the MOU") was entered into by the lead bank for the domestic creditors, i.e. Korean banks or Korean branches of non-Korean banks with claims against the Company and SK Networks. The MOU in Korean language of over 200 pages was not exhibited to the supporting affidavit but has been provided to the provisional liquidators. In summary, the creditors who have agreed to be bound by the MOU have agreed that 74.88% of their claims against the Company will be the obligations of SK Networks only and the balance of 25.12% will remain debts of the Company. About half of the 74.88% owed by SK Networks will be converted into equity and the balance will be restructured. The amount the Company is required to pay to the MOU creditors, being 25.12% of their original claims, is approximately US$47.3 million. It would appear from the 2nd report of the provisional liquidators that the Company does have sufficient cash to discharge such claims as there are cash assets of about US$61 million.

8. The only other material unrelated creditor of the Company whose claim is to be dealt with through the restructuring is the Korean Ministry of Information and Communications ("KMIC") and it has reached an agreement in principle with SK Networks to transfer to the latter all debts due and owing to it from the Company.

9. There are claims of employees and other unsecured creditors against the Company. The names and amounts owed to these creditors are set out in a schedule annexed to the draft order placed before me. The total amount owed to these creditors is US$134,532.00. The Company will seek an order to approve settlement of these claims of employees and other unsecured creditors in full from the assets of the Company as provided in the draft order.

10. According to the 3rd report of the provisional liquidators, an overwhelming majority of creditors being 99% in value, have confirmed support for the present application of the Company to withdraw the petition and have the provisional liquidators discharged. Only 1% in value of creditors have not provided written confirmation of support to the application.

11. Only one objection to this application has been raised and that is by Credit Lyonnais. The solicitors for this creditor have written to the court on 18 December 2003 stating that Credit Lyonnais has not filed a Notice of intention to be heard nor does it intend to be substituted as petitioner for commercial reasons. It proposes that the petition should be adjourned for 60 days to facilitate the ongoing restructuring attempts. I should mention that Credit Lyonnais is among the foreign financial creditors that have concluded the Exchange Agreement with SK Networks, in which each of the creditors "irrevocably waives and surrenders all rights, claims and actions (other than rights, claims and actions assigned to the Issuer under the Exchange Agreement)", although it is alleged by Credit Lyonnais and Arab Banking Corporation (BSC) that they have combined claims of US$280,000.00 against the Company which remain outstanding notwithstanding the Exchange Agreement. I understand that the alleged outstanding claim of Credit Lyonnais is in relation to costs against the Company and the alleged claim of Arab Banking Corporation (BSC) relates to default interest. The provisional liquidators are aware that SK Networks has been liaising with these two creditors to resolve their claims and Arab Banking Corporation (BSC) has confirmed to the provisional liquidators it does not intend to oppose the present application.

12. As an agreement in principle has now been reached with all the material creditors of the Company, there does not appear to be any need for the continued involvement of the provisional liquidators and the remaining steps required to be taken to complete the restructuring can be more conveniently dealt with in Korea and at less expense in terms of professional fees. The provisional liquidators do not object to their release. I should have regard to the wishes of the overwhelming majority of creditors. Even if the cost claim of Credit Lyonnais remains a point of dispute, it may still be resolved after the withdrawal of the petition and the discharge of the provisional liquidators. There is underway a worldwide restructuring of the Company's debts. The threat of disorganised seizure of the Company's assets has abated. I am satisfied that the Company is not seeking to obtain an unfair advantage and has acted with regard to the pari passu principle. The position of the employees and other unsecured creditors with a total claim of US$134,532.00 is protected by the proposal to pay them in full out of the assets of the Company within 7 days of the order to be made.

13. For the above reasons, I grant the application of the Company and order that the appointment of the provisional liquidators be discharged and the petition herein be dismissed. I make an order in terms as per the draft order submitted to me with amendments to be made to paragraph 7 thereof as regards other consequential orders and directions following the dismissal of the petition.