Bankruptcy Expert: "JTBC's Default Declaration Marks the Dawn of a Structural Crisis in K-Content"

*This content was translated by AI.

As JTBC, a comprehensive programming channel, and four other core companies of the JoongAng Group simultaneously entered court receivership, marking the first time since the launch of comprehensive channels that a group of media conglomerates has undergone corporate rehabilitation procedures as a whole, a bankruptcy expert diagnosed the current situation not as a mere liquidity crisis but as the dawn of a structural crisis in the K-content ecosystem. The expert predicted that the 700 billion won sports broadcasting rights would become the decisive variable determining the success or failure of the rehabilitation M&A.

JTBC declared a debt default (default) on June 12 after failing to repay 20.6 billion won in securitized loans upon maturity, causing its credit rating to fall to 'D', a stage effectively equivalent to default, following the rehabilitation application. Subsequently, on June 14, holding company JoongAng Holdings, Contentree JoongAng, Megabox JoongAng, and JoongAng P&I filed for the opening of rehabilitation proceedings with the Seoul Bankruptcy Court. One day later, on June 15, JTBC, the face of the group, also applied for rehabilitation. The Seoul Bankruptcy Court assigned all five companies to the Rehabilitation Division 2 (presided over by Judge Jeong Jun-young) and issued preservation measures and a comprehensive prohibition order for all five companies on June 15.

In addition, JTBC applied for the Autonomous Restructuring Support (ARS) program, which involves pausing the opening of rehabilitation proceedings and conducting voluntary negotiations with creditors, while JoongAng Ilbo, the parent foundation of the group, decided to separately pursue corporate workout (corporate financial restructuring improvement) rather than rehabilitation.

In response, Han-su Law Firm attorney Lee Min-gyu (CEO) pointed out that the holding company, which serves as the control tower, directly filed for rehabilitation. "Usually, when a subsidiary collapses, the parent company either cuts off the tail or plays a defensive role by providing funds from the periphery, but this time, the holding company JoongAng Holdings entered the court alongside its core subsidiaries on the first day," the attorney stated. "This is a signal that the entire group's funding lines are so blocked that even the holding company level cannot cope, and it is a declaration of 'all-out war' to sever the intertwined loan and guarantee links between subsidiaries under court supervision and reorganize the business."

Attorney Lee Min-gyu also highlighted the fact that each subsidiary chose a different track as a key point of observation. "Broadcasting loses value the moment transmission stops, and with re-approval reviews approaching, JTBC is the place where the most benefit can be gained by negotiating voluntarily with the creditor group rather than immediately receiving an opening decision," he said. "ARS is a move to keep the path open to a 'P-plan (pre-rehabilitation plan).' Regarding JoongAng Ilbo's corporate workout, he interpreted it as a proactive ring-fencing strategy to separate JoongAng Ilbo, the group's foundation and media company, from the court receivership subsidiaries as an independent legal entity, thereby preventing subsidiary risks from spreading to the main body."

Regarding future procedures, Attorney Lee Min-gyu forecasted a two-track approach: 'stand-alone' repayment of debts under the existing system and 'pre-approval M&A' involving external capital infusion. He singled out Megabox, the third-largest multiplex, as the most attractive asset, noting that an acquirer could take it over in the form of a 'clean company' by injecting funds to clear existing debts. In contrast, he predicted that the pool of potential acquirers for JTBC would be extremely limited due to legal barriers, including the Broadcasting Act's restriction on equity ownership by large corporations and newspapers (30%) and the need for approval from the Korea Communications Commission. JTBC is currently facing a re-approval review, and the Korea Communications Commission has stated it will examine the financial situation during the review process.

Attorney Lee Min-gyu stated regarding the 700 billion won broadcasting rights contract, "If international organizations (FIFA, IOC) refuse Korean court debt adjustment based on automatic termination clauses, the large remaining balance of the broadcasting rights could become a 'poison clause (Deal Breaker)' that transfers the burden to the acquirer, causing them to abandon the deal." He added, "Given that the market is one of 'buyer's advantage' where terrestrial broadcasters and OTTs feel fatigue from astronomical broadcasting rights fees, ironically, international organizations may also find room to reach a compromise within the rehabilitation process. The key lies in whether these broadcasting rights will become the catalyst for M&A or an obstacle."

Attorney Lee Min-gyu summarized the core of media company bankruptcy as 'time.' "In manufacturing, even if a factory stops, machinery and inventory remain, but in media companies, the moment they stop, intangible assets such as personnel, IP, and trust evaporate into thin air," he said. "He suggested that self-help measures, such as the sale of the Sangam office and Ilsan studio worth 550 billion won through Koramko Asset Trust, should be pursued swiftly, and the court should actively utilize ARS and DIP financing to prevent the worst-case scenario of broadcasting suspension." He concluded by emphasizing, "Corporate rehabilitation is not a system that kills companies but a cardiopulmonary resuscitation that adjusts interests to revive them. If the two-track deal of office building sales and pre-approval M&A succeeds, this crisis could become an opportunity to turn adversity into advantage by shedding the profligate cost structure and improving the of the Korean media industry. We must secure the golden time before time runs out."

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*This content was translated by AI.