================================================================= TRIGEM BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2005 (ISSN XXXX-XXXX) November 14, 2005 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- TRIGEM BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of TRIGEM BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO TRIGEM BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF TRIGEM COMPUTERS INC. [00002] TRIGEM COMPUTER'S BALANCE SHEET AS OF SEPTEMBER 30, 2004 [00003] TRIGEM COMPUTER'S CHAPTER 15 DATABASE [00004] LIST OF PENDING LITIGATION INVOLVING TRIGEM [00005] OVERVIEW OF CHAPTER 15 OF THE U.S. BANKRUPTCY CODE [00006] RECEIVER'S APPLICATION FOR RECOGNITION OF TRIGEM CRA CASE KEY DATE CALENDAR ----------------- 05/18/05 Petition to Commence CRA Proceeding Filed in Korea 06/16/05 TriGem's CRA Petition Accepted in South Korea 07/29/05 Bar Date for Filing Claims in Korea 10/06/05 First Meeting of Interested Parties in Korea 10/06/05 Examination of Reorganization Claims in Korea 11/03/05 Voluntary Chapter 15 Petition Date 12/07/05 Hearing to Consider CRA As Foreign Main Proceeding Deadline to File a Plan of Reorganization in Korea ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO TRIGEM BANKRUPTCY NEWS ----------------------------------------------------------------- TRIGEM BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of TRIGEM BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving TRIGEM BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. Currently, we provide similar coverage about the restructuring proceedings involving Delta Air Lines, Northwest Airlines, Mesaba Aviation, US Airways, UAL Corporation and United Airlines, VARIG, S.A., ATA Airlines, McLeodUSA Incorporated, Adelphia Communications and Adelphia Business Solutions, WorldCom, Winstar, Refco, Inc., Enron Corp., Mirant Corp., PG&E National Energy Group, Entergy New Orleans, Levitz Home Furnishings, O'Sullivan Industries, WestPoint Stevens, Winn- Dixie Store, Inc., Kmart Corp., Ames Department Stores, Spiegel, Inc. 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Please enter my personal subscription to TRIGEM BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) TRIGEM BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' chapter 11 proceedings. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of TRIGEM BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF TRIGEM COMPUTERS INC. ----------------------------------------------------------------- TriGem Computers Inc. 1125-1 Shingil-dong Danwon-gu, Kyunggi-Do Ansan City 425-839 KOREA http://www.trigem.com/ TriGem is a global maker of personal computers that supplies over four million PCs a year to clients all over the world. TriGem's main products are Desktop PCs, Notebook PCs, LCD monitors, printers, scanners, other peripherals, and PIDs, including the DreamSys and LLUON PC brands. TriGem has a global network of production, research, marketing, logistics and service centers in major markets, like the United States, Japan, China, Taiwan, Europe, Australia and Mexico. TriGem employs over 4,000 employees worldwide. Founded in 1980, TriGem is the first Korean company to produce PCs and immediately won export contracts to Canada. TriGem advanced into world markets in 1986 through its first large- volume OEM agreements to supply PCs to Seiko Epson of Japan and Computer Land of the United States. By 1989, with the company's exports totaling more than $100,000,000 a year, TriGem was listed on the Korea Stock Exchange and had become a household name. TriGem opened a new plant in 1991 in Korea with the capacity to produce a million PCs a year. TriGem developed Korea's first personal digital assistant in 1993, and ISO 9002 certification was achieved in 1994. By the mid-90s, TriGem had set up branches and factories in strategic market centers around the world, together with a network of logistics and sales service centers. TriGem's Shareholders As of May 23, 2005, the total number of issued and outstanding shares of TriGem is 68,820,657 common shares, with par value per share of KRW2,500. The company's paid-in capital is KRW172,051,642,500. TriGem's major shareholders are: Shareholder Shares Percentage ----------- ------ ---------- Hong-Soon Lee, representative 2,402,302 3.49% director MSD Co., Ltd., an affiliate 2,215,951 3.22% Hong-Soon Lee's relatives, 49,102 0.07% including Jong-Tae Lee The number of shares held by small shareholders account for about 90% of the total number of issued and outstanding shares. Dipping Performance In 2003, Korea's domestic PC market was hit by a series of bankruptcy of competitively weak small and medium enterprises due to economic recession and the challenge posed by foreign companies. After reaching its apex in 2000, TriGem's sales turnover has been continuously falling: Year Sales Turnover ---- -------------- 2000 KRW4,010.9 billion 2001 2,639.9 billion 2002 2,366.9 billion 2003 2,226.2 billion 2004 2,181.2 billion TriGem recorded net profits for 2001 and 2004, and net losses for 2000, 2002 and 2003. Year Net Profit ---- ---------- 2000 (KRW15.9 billion) 2001 6.4 billion 2002 (497.3 billion) 2003 (4.5 billion) 2004 16.2 billion TriGem recorded net losses of KRW2.9 billion -- on sales turnover of KRW367.5 billion -- for the first quarter of 2005 alone. TriGem's Balance Sheets As of March 31, 2005, TriGem reported KRW872.3 billion in total assets and KRW774.6 billion in total liabilities, excluding guarantee liabilities. Including the guarantee liabilities, TriGem's total debts are estimated to be about KRW1.175 trillion. Liquidity Crunch TriGem's profitability and competitiveness abruptly weakened due to, among other things, the occurrence of very large losses caused by the failure of domestic and overseas investments amounting to about KRW534.1 billion and the recent worldwide stagnation in the PC market. These factors caused TriGem to increase its external financing to secure operating capital, which then led to the deterioration of its financial structure and demands by financial institutions for the reduction of the size of the company's credit, all of which led TG to face a serious liquidity crunch. While undergoing difficulties, TriGem lost its ability to independently finance its working capital as a result of, among other things, the end of the company's business relationship with major customers Hewlett-Packard and Gateway. Korean Bankruptcy Case TriGem filed a petition for the commencement of a corporate reorganization proceeding pursuant to the Corporate Reorganization Act with the Suwon District Court, Bankruptcy Division, in the Republic of Korea. Subsequently, the Korean Court held that TriGem has fallen into a state where it cannot pay its debts when due without causing significant disruptions to its business, and TriGem is in a situation where there may occur a cause for its bankruptcy. The Korean Court granted TriGem's petition on June 16, 2005, and appointed Il-Hwan Park as the company's receiver. Korean judges Gi-Bong Gil, Gi-Young Choi and Gang-Dae Kim preside over the case. The Korean Court also established July 29, 2005, as the deadline for creditors to file against TriGem reorganization claims, secured reorganization claims and shares. The first meeting of interested parties in the TriGem case and the examination of claims and secured reorganization claims were held on October 6, 2005, at the Suwon District Court. TriGem's U.S. affiliates, TriGem America Corporation and TriGem Texas, Inc., are debtors in separate cases filed under Chapter 11 of the Bankruptcy Code before the U.S. Bankruptcy Court for the Central District of California in June 2005. ----------------------------------------------------------------- [00002] TRIGEM COMPUTER'S BALANCE SHEET AS OF SEPTEMBER 30, 2004 ----------------------------------------------------------------- TRIGEM COMPUTER, INC. BALANCE SHEETS As of September 30, 2004 ASSETS Korean Won U.S. Dollars ---------- ------------ Current Assets Cash and cash equivalents 4,866,952,580 $4,239,875 Short-term financial instruments 47,195,776,718 41,114,885 Marketable securities 2,000,058,663 1,742,363 Trade accounts & notes receivable 435,210,907,584 379,136,604 Short-term loans 6,856,457,251 5,973,044 Uncollected balance 24,986,367,344 21,767,024 Accured income 2,101,470,622 1,830,709 Forward contract 75,927,641 66,145 Advance payments 746,194,725 650,052 Prepaid expenses 1,639,934,501 1,428,639 Prepaid taxes 439,046,552 382,478 Inventories 78,223,811,129 68,145,144 ---------------- ------------- Total current assets 604,342,905,310 $526,476,963 Fixed Assets long-term financial instruments 9,612,000,000 8,373,552 Investment Securuties 139,332,455,512 121,380,308 Long-term other accounts receivable, net of discount 4,240,000,000 3,693,702 Guarantee deposits 19,834,897,418 17,279,290 Deferred income tax assets 41,675,113,406 36,305,526 Other assets 2,094,076,863 1,824,268 Property, plant and equipment, net of accumulated depreciation 97,503,423,996 84,940,695 Intangible assets 13,930,659,648 12,135,778 ---------------- ------------- Total fixed assets 328,222,626,843 $285,933,119 ---------------- ------------- TOTAL ASSETS 932,565,532,153 $812,410,081 ================ ============= LIABILITIES AND SHAREHOLDERS' EQUITY Korean Won U.S. Dollars ---------- ------------ Current liabilities: Trade accounts & notes payables 513,193,072,093 $447,071,236 Short-term borrowings 20,351,283,757 17,729,143 Accounts payable, other 124,223,966,150 108,218,456 Advance by customers 64,977,642 56,606 Deposits payable 875,503,255 762,700 Guarantee for deposits payable 6,590,906,148 5,741,708 Accrued expenses 9,478,393,968 8,257,160 Current maturities of long-term debt 10,360,226,815 9,025,374 Long-term borrowings by ABS 32,000,000,000 27,876,993 Current maturities of net of discounts on debentures 31,980,185,432 27,859,731 Forward exchange contracts 263,761,345 229,777 Deferred income 236,858,528 206,341 ---------------- ------------- Total current liabilities 749,619,135,133 $653,035,225 Fixed liabilities Convertible Bond, net 55,113,466,953 48,012,429 Long-term debt 19,040,084,480 16,586,884 Long-term debt by ABS 8,000,000,000 6,969,248 Provisions for product warranties and performance guarantees 8,120,722,292 7,074,416 Accured severance benefits, net 12,804,981,945 11,155,137 Reserve for contingent losses 600,000,000 522,694 ---------------- ------------- Total fixed liabilities 103,679,255,670 $90,320,808 ---------------- ------------- Total liabilities 853,298,390,803 $743,356,033 Shareholders' equity: Capital stock 151,152,240,000 $131,677,184 Common stock 151,152,240,000 131,677,184 Capital surplus 42,666,529 37,169 Deficit (46,632,931,513) (40,624,559) Capital adjustments: (25,294,833,666) (22,035,747) Treasury stocks (13,425,303,000) (11,695,534) Unrealized losses on valuation of investment securities by equity method (11,987,658,498) (10,443,121) Stock options 300,356,900 261,658 Overseas operations translation credit (182,229,068) (158,750) ---------------- ------------- Total shareholders' equity 79,267,141,350 $69,054,048 ---------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 932,565,532,153 $812,410,081 ================ ============= *** As of March 31, 2005, TriGem reported KRW872.3 billion in *** total assets and KRW774.6 billion in total liabilities, *** excluding guarantee liabilities. Including the guarantee *** liabilities, TriGem's total debts are estimated to be about *** KRW1.175 trillion. ----------------------------------------------------------------- [00003] TRIGEM COMPUTER'S CHAPTER 15 DATABASE ----------------------------------------------------------------- CRA Debtor: TriGem Computer, Inc. CRA Petition Date: May 18, 2005 Korean Court: Suwon District Court, Bankruptcy Division Republic of Korea CRA Proceeding No.: 2005 Hoe 5 Corporate Reorganization Korean Judges: Judge Gi-Bong Gil Judge Gi-Young Choi Judge Gang-Dae Kim U.S. Bankruptcy Court: United States Bankruptcy Court Central District of California (Los Angeles) Edward R. Roybal Federal Building 255 East Temple Street Los Angeles, California 90012 Telephone (213) 894-3118 Petitioner's Chapter 15 Petition Date: November 3, 2005 Chapter 15 Proceeding No.: 05-50052 U.S. Judge: The Honorable Thomas B. Donovan Chapter 15 Petitioner: Il-Hwan Park In his capacity as Receiver for TriGem 201-404 Shinshigsji Apartment Mok 6-dong, Yangchun-gu Seoul, Republic of Korea Petitioner's Chapter 15 Counsel: Charles D. Axelrod, Esq. Stutman Treister & Glatt, P.C. 1901 Avenue of the Stars, 12th Floor Los Angeles, California 90067 Telephone (310) 228-5600 ----------------------------------------------------------------- [00004] LIST OF PENDING LITIGATION INVOLVING TRIGEM ----------------------------------------------------------------- Pursuant to Rule 1007(a)(4) of the Federal Rules of Bankruptcy Procedure as adopted in the Central District of California pursuant to General Order 05-02, Il-Hwan Park, in his capacity as Receiver for TriGem Computer, Inc., advised the Bankruptcy Court that TriGem is a party to litigation pending in the United States initiated by these parties: 1. Robert Miles (Plaintiff) c/o Robert C. Schubert, Esq. Schubert & Reed LLP Two Embarcadero Center, Suite 1660 San Francisco, CA 94111 2. Toshiba Corporation c/o Evan Finkel, Esq. Pillsbury Winthrop Shaw Pittman LLP 725 South Figuera Street, Suite 2800 Los Angeles, California 90017-5406 3. David Packard (Plaintiff) 5870 Jefferson Street Vidor, TX 77662 -- and -- John E. Hock (Plaintiff) 2002 Solitude Cave Round Rock, TX 78664 Gary N. Reger, Esq. Orgain, Bell & Tucker 470 Orleans Beaumont, TX 77701 Law Office of L. DeWayne Layfield P.O. Box 3829 Beaumont, TX 77704-3829 The Reaud Law Firm 801 Laurel Beaumont, TX 77701 Hubert Oxford, III, P.C. 3535 Calder, P Floor Beaumont, TX 77706 The Dodd Law Firm P.O. Box 3504 Beaumont, TX 77704-5304 Joseph C. Blanks, P.C. P.O. Drawer 999 Doucette, TX 75942 Mr. Park, however, notes that while TriGem has been named a defendant in the Miles lawsuit, it does not appear that TriGem has been ever served. TriGem may not be a party to the lawsuit. ----------------------------------------------------------------- [00005] OVERVIEW OF CHAPTER 15 OF THE U.S. BANKRUPTCY CODE ----------------------------------------------------------------- Chapter 15 of the United States Bankruptcy Code codifies a comprehensive framework through which representatives in corporate insolvency proceedings outside the U.S. can obtain access to the United States courts. Effective October 17, 2005, Chapter 15 replaced Bankruptcy Code Section 304. Chapter 15 is much broader and more detailed than Section 304. Chapter 15 is based on the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission for International Trade Law (UNCITRAL). Legislation based on the UNCITRAL Model Law on Cross-Border Insolvency has also been adopted in Eritrea, Japan (2000), Mexico (2000), Poland, Romania (2003), South Africa (2000), and within Serbia and Montenegro, Montenegro (2002). "[T]he enactment of the UNCITRAL Model Law on Cross-Border Insolvency is a significant change to the Bankruptcy Code that may greatly impact the global economy. If successful, this new experiment in globalization may save jobs and create greater certainty in the international financial market. If unsuccessful, the law could create confusion and chaos as courts worldwide compete with one another across international boundaries for large multinational bankruptcy cases," Dechert LLP's Bankruptcy and Corporate Recovery and Insolvency practice group advised its clients in an April 2005 Special Alert. A full-text copy of the Chapter 15 provisions is available at: http://chapter15.com/chapter_15_statute_full_text.pdf ----------------------------------------------------------------- [00006] RECEIVER'S APPLICATION FOR RECOGNITION OF TRIGEM CRA CASE ----------------------------------------------------------------- Il-Hwan Park, the duly appointed receiver for TriGem Computer, Inc., asks the U.S. Bankruptcy court to recognize TriGem's pending case under the Corporate Reorganization Act in Korea as a foreign main proceeding. Section 1517 of the Bankruptcy Code provides that "an order recognizing a foreign proceeding shall be entered" if three conditions are met: 1. The foreign proceeding for which recognition is sought is a foreign main proceeding or foreign non-main proceeding within the meaning of Section 1502; 2. The foreign representative applying for recognition is a person or body; and 3. The petition meets the requirements of Section 1515. TriGem's CRA Case has met these requirements, Mr. Park says: -- The CRA Case is a foreign main proceeding within the meaning of Section 1502(4) since it is a judicial corporate reorganization proceeding pending in the Republic of Korea, the country where TriGem has the center of its main interests. Mr. Park notes that TriGem's head office is in Ansan City in Korea. It has branch offices in Seoul, Busan, Kyungbuk, Choongchung and Honam. Its business, research and training centers are in Wonju. -- The foreign representative applying for recognition is a person over the age of 18. -- The Chapter 15 Petition was accompanied by: (i) the decision of the Suwon District Court in Korea, which affirmed the existence of the CRA Case and the appointment of the Receiver; (ii) a translation of the Decision in English; and (iii) a statement identifying all foreign proceedings with respect to the Debtor known to the Receiver. A full-text copy of the Korean Court's Order accepting TriGem's CRA Petition is available at: http://chapter15.com/c15_files/20051109/TriGemKoreanCourtOrder.pdf Judge Donovan will convene a hearing on Mr. Park's Petition on December 7, 2005, at 10:30 a.m. Any interested part opposing, joining or responding to the Petition must file position papers to the Bankruptcy Court by November 23, 2005. Responses not timely filed and served may be deemed by the Court to consent to the granting of the CRA Case as a foreign main proceeding. *** End of Issue No. 1 ***