Insolvency Expert: "JTBC's Default Declaration Bought Up to Three Months"[Star Issue]

*This content was translated by AI.

An insolvency specialist lawyer expressed his views on why, among the five Central Group companies that filed for corporate rehabilitation, only JTBC jointly applied for the voluntary restructuring support (ARS) program.

Lawyer Lee Min-gyu (CEO) of Hansu Law Firm (insolvency specialist) said on the 1st, "The unique characteristic of the broadcasting industry explains why only JTBC chose ARS among the five companies." He added, "When broadcasting stops, brand and business value evaporate instantly. With JTBC facing a re-licensing review, it is more beneficial to buy time to negotiate terms with the creditor group rather than risk being shaken by a forced opening. ARS also serves as a strategic move to keep the path open for a pre-rehabilitation plan (P-plan)."

JTBC declared a default (failure to meet debt obligations) on June 12 after failing to repay 20.6 billion won in maturing securitized loans, causing its credit rating to effectively fall to 'D', the stage of actual default. Subsequently, on June 14, holding company Central Holdings, Contentree Central, Megabox Central, and Central P&I, and on June 15, JTBC itself, filed for the opening of rehabilitation proceedings at the Seoul Bankruptcy Court. The court assigned all five companies to the Rehabilitation Division II (Presiding Judge Jeong Jun-young's bench) and issued preservation orders and a comprehensive injunction. Among them, only JTBC requested a suspension of the opening of rehabilitation proceedings and jointly applied for the ARS program.

Thereafter, the Seoul Bankruptcy Court accepted JTBC's request for the ARS program on June 30. As a result, the opening of rehabilitation proceedings is suspended, and JTBC will engage in voluntary negotiations with creditors for one month under court supervision.

ARS is a system operated by the Seoul Bankruptcy Court according to its practical guidelines. It is a procedure where the court suspends the formal decision to open rehabilitation proceedings for a certain period, allowing the company and creditors to negotiate restructuring voluntarily. If the court approves, the opening can be suspended for up to three months, and the period can be extended if negotiations progress. Unlike formal rehabilitation proceedings that immediately enter a court-appointed administrator system, the key difference is that ARS buys time at the pre-opening stage to seek an agreement between the parties.

Lawyer Lee Min-gyu also pointed out under what circumstances ARS is effective, stating, "If major creditors are concentrated in two or three banks and operations do not need to be suspended, there is a high possibility of negotiating terms quickly through ARS." However, he noted, "Conversely, in structures where stakeholders such as suppliers, convertible bonds, and private bondholders are numerous and dispersed, it takes a long time to meet each party's demands, often leading to a transition to formal rehabilitation proceedings."

Lawyer Lee Min-gyu added, "When a company faces difficulties, people often think only of court receivership or closure, but there are several stages in between, including ARS, simplified rehabilitation, and pre-rehabilitation plans." He continued, "This is not a story limited to large corporations. The fewer the number of creditors, the higher the likelihood that SMEs (small and medium-sized enterprises) or self-employed individuals can recover quickly through voluntary negotiations or simplified procedures. However, many are unaware of these systems and immediately think of closure."

He further stated, "Insolvency systems, including corporate rehabilitation, are not procedures to kill a company but rather cardiopulmonary resuscitation to adjust interests and revive the business." He concluded, "Hoping that the JTBC case will serve as an opportunity for companies and small business owners in crisis to move beyond the misconception that 'there is no way out but closure' and explore the path to rehabilitation that suits them."

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*This content was translated by AI.