Review comes as creditor exposure exceeds W1.3 trillion
JTBC headquarters in Mapo-gu, western Seoul (JTBC)
JoongAng Group's battle for survival enters court next week, with the Seoul Bankruptcy Court set to question representatives of five affiliates that sought rehabilitation after broadcaster JTBC defaulted on short-term debt.
Legal sources said Wednesday that the court would question representatives of JTBC, JoongAng Holdings, Contentree JoongAng, Megabox JoongAng and JoongAng P&I on Tuesday.
It is expected to examine the scale of their liabilities, liquidity conditions and possible debt restructuring plans before deciding whether to open rehabilitation proceedings.
JTBC has also asked the court to approve an autonomous restructuring support program, under which the court can hold off opening formal rehabilitation proceedings while the company negotiates with creditors.
The program would allow JTBC to defer rehabilitation for up to three months, while the other affiliates enter the regular rehabilitation process.
The crisis erupted after JTBC failed to repay 20.6 billion won ($13.6 million) on debt that matured last week, triggering a groupwide liquidity emergency.
Within days, the group's core affiliates sought court protection, while the court issued an injunction freezing assets and claims to prevent creditors from rushing in to seize collateral or recover debt before others can.
Credit analysts saw years of weakening earnings as a key driver behind JoongAng Group's liquidity crunch. In a report Tuesday, Korea Ratings cited a prolonged slump across the group's media businesses since 2020, as advertising revenue weakened, cinemas struggled and viewers shifted to streaming, with rising production costs adding to the burden. Persistent free cash flow deficits drove the group toward more borrowing, interaffiliate funding and securitized debt.
The fallout is rippling through Korea's credit market.
Financial firms' direct credit exposure to the five affiliates is estimated at 796.9 billion won, while exposure to eight other key JoongAng-related companies, including JoongAng Ilbo, SLL JoongAng and JoongAng Ilbo M&P, stands at about 1.32 trillion won, according to NICE Investors Service.
Banks account for most of the exposure, at 832.9 billion won, followed by special financial institutions with 164.2 billion won, securities firms with 125.1 billion won and credit finance companies with 79.7 billion won.
NICE said the figures exclude indirect exposure through private equity funds, securitization vehicles and other structures. It put total borrowings at JoongAng's eight major affiliates at about 2.8 trillion won, suggesting broader market exposure could be larger.
Retail investors may face sharper risks. Market watchers estimate that about 790.5 billion won in JoongAng-related public bonds and commercial paper may have been sold through brokerages, pointing to sizable exposure among retail investors. Total corporate bonds outstanding across the group are estimated at about 900 billion won.
Hong Jeong-do, vice chairman of JoongAng Group, bows in apology during a press conference at the company's headquarters in Seoul after several affiliates, including JTBC, moved to seek court-led rehabilitation amid a groupwide liquidity crisis. (Yonhap)
The sharp balance sheet deterioration has already been reflected in credit ratings. NICE Investors Service cut JTBC's senior unsecured bond rating to D from CCC, after earlier lowering its long-term rating to CCC from BBB, while downgrading JoongAng Ilbo to BB- from BBB. Korea Ratings also downgraded JTBC's commercial paper and unsecured bond ratings to D and cut JoongAng Ilbo's long- and short-term ratings to B- and C, respectively.
For financial firms, the key question is potential losses. NICE singled out Hanyang Securities as the only firm with material exposure relative to its assets and capital, with book exposure of about 84 billion won, including 54 billion won to JTBC and 30 billion won to JoongAng Ilbo.
For bondholders, the court process could mean delayed payments, maturity extensions, reduced interest or losses on principal, depending on the rehabilitation plan.
Meanwhile, the fallout also hit equities, with Hanyang Securities shares tumbling more than 11 percent Wednesday, while trading in Contentree JoongAng has been suspended since Monday.
Experts say the crisis goes beyond a simple liquidity issue.
"This is not a simple case of cutting off a troubled subsidiary," said Lee Min-kyu, a bankruptcy lawyer at Hansu Law Firm. "It signals that funding channels across the group have been blocked to a degree that even the holding company can no longer withstand."
Korea Ratings offered a similar view, saying the simultaneous rehabilitation filings show that the group's financial burden has "exceeded a manageable level" and that its funding conditions and liquidity response capacity have "sharply weakened."
The ratings agency said the effectiveness of the group's self-hel…
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