JoongAng Group faces 1.3 trillion won credit exposure as affiliates seek rehabilitation

Financial institutions have extended approximately 1.3 trillion won in credit to eight companies within the JoongAng Group, which includes prominent media outlets like JoongAng Ilbo and JTBC. This revelation comes as five of the group's affiliates, including JTBC, Central Holdings, Central P&I, Megabox JoongAng, and Contentree JoongAng, filed for corporate rehabilitation proceedings earlier this week. The immediate trigger for the filings appears to be JTBC's failure to repay a 20.6 billion won securitized loan upon maturity, leading to a default.

According to Nice Investors Service, the exposure of financial institutions to the five companies seeking rehabilitation amounts to about 800 billion won. When including JoongAng Ilbo, SLL JoongAng, and JoongAng Ilbo M&P, the total credit exposure rises to approximately 1.3 trillion won. This figure represents direct credit extensions, excluding indirect forms like fund investments.

Banks hold the largest portion of this exposure at 832.9 billion won, followed by special financial institutions (164.2 billion won), securities firms (125.1 billion won), and credit card companies (79.7 billion won). While the exposure is relatively diversified across financial sectors, potentially limiting the impact on individual institutions, Hanyang Securities stands out with a significant exposure of 84 billion won relative to its total assets and equity.

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The media affiliates, including JoongAng Ilbo and JTBC, face a structural decline in broadcast advertising revenue. Megabox JoongAng has suffered from the post-COVID-19 slump in the cinema industry and a shift towards streaming services. SLL JoongAng, meanwhile, grapples with increased content production costs and poor performance of its overseas subsidiaries.

Korea Investors Service noted that prolonged underperformance since 2020 has led to total borrowings of 3 trillion won for major JoongAng Group affiliates by the end of last year. They assessed that the group's own efforts are insufficient to improve its financial structure. The media affiliates, including JoongAng Ilbo and JTBC, face a structural decline in broadcast advertising revenue. Megabox JoongAng has suffered from the post-COVID-19 slump in the cinema industry and a shift towards streaming services. SLL JoongAng, meanwhile, grapples with increased content production costs and poor performance of its overseas subsidiaries.

"The simultaneous filing for corporate rehabilitation by these affiliates demonstrates that the group's overall financial burden has exceeded manageable levels, significantly worsening its fundraising capabilities and liquidity response," Korea Investors Service stated. "Asset securitization plans, such as the sale of group headquarters and affiliate shares, aimed at reducing group debt and securing liquidity, have lost their effectiveness. It is unlikely that the group can mitigate short-term liquidity risks and improve its financial structure through self-help measures alone."

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The simultaneous filing for corporate rehabilitation by these affiliates demonstrates that the group's overall financial burden has exceeded manageable levels, significantly worsening its fundraising capabilities and liquidity response. Asset securitization plans, such as the sale of group headquarters and affiliate shares, aimed at reducing group debt and securing liquidity, have lost their effectiveness. It is unlikely that the group can mitigate short-term liquidity risks and improve its financial structure through self-help measures alone.