[Edaily Marketin, Reporter Lee Geon-eom] As JTBC fails to overcome its liquidity crisis and faces default, panic selling of corporate bonds issued by affiliates of the Joongang Group is unfolding in the bond market. With the failure to repay large-scale securitized loans coinciding with credit rating downgrades for major affiliates, fear has gripped the market, causing corporate bond prices to plummet to around 60% of their face value. As liquidity risks spread due to the high financial interdependence among affiliates, uncertainty is mounting regarding the ability to recover investments in the future.

According to BondWeb on the 15th, as of this morning, the prices of major corporate bonds issued by JTBC, SLL JoongAng, and JoongAng Ilbo were trading in the range of 6,160 won to 7,021 won. All are trading at levels approximately 30% to 38% below their face value (10,000 won).

Looking at the details, “JTBC 36-2” was traded at 7,021 won, with its spread (premium) over the market average soaring by a staggering 31,571.5 basis points (1 bp = 0.01 percentage point). The yield on the trade soared to 321.16%. ‘SLL JoongAng 21’ also traded at 6,790 won, recording a spread of 15,605.7 basis points (yield of 162.32%).

The situation at JoongAng Ilbo is similar. “JoongAng Ilbo 43-2” traded at 6,857.2 won with a spread of 9,856.5 bps. “JoongAng Ilbo 47” was traded at 6,160 won, the lowest price of the session. Analysts say this fully reflects market fears that the company’s ability to meet short-term debt maturities is limited.

The decisive trigger for this sharp plunge in corporate bond prices is the large-scale default on principal and interest payments. On the 12th, JTBC defaulted abruptly after failing to repay principal and interest on securitized loans totaling 20.6 billion won, including Mir J-C (5.6 billion won) and Jeil TBC J-C (15 billion won). This occurred as funding efforts utilizing the company’s assets were delayed, ultimately blocking all avenues for financing and causing the credit crisis to spread across the entire group.

With the default, credit rating agencies simultaneously and significantly downgraded the credit ratings of major affiliates, causing the group’s external creditworthiness to be severely shaken. On the 12th, NICE Credit Rating (NICE) lowered the credit rating of JTBC’s unsecured bonds from ‘BBB (Negative)’ to ‘CCC,’ a level indicating imminent default.

#Korea Ratings (KR) also downgraded JTBC’s unsecured bonds from ‘BBB’ to ‘BB’ and its commercial paper (CP) and short-term notes from ‘A3’ to ‘B’ on the same day. It also downgraded SLL Joongang and JoongAng Ilbo’s unsecured bonds from ‘BBB’ to ‘BB+’ and their CP and short-term notes from ‘A3’ to ‘B+’. On the 13th, Korea Ratings downgraded the unsecured bonds of SLL JoongAng and JoongAng Ilbo to ‘BB’ and the CP and short-term notes of SLL JoongAng, Contentre JoongAng, and Megabox JoongAng to ‘B’ in a routine review.

A bond market official explained, “The JoongAng Group has very high financial interdependence due to intercompany loans and credit facilities, leading to significant market concerns that a liquidity crisis in one part of the group could spread to the entire group,” adding, “Given the difficulty in conducting normal trading, it does not appear easy to dispel market concerns in the short term.”

Meanwhile, the credit rating industry views the risk of contagion within the Joongang Group as high. Kwon Hyuk-min, a senior analyst at Han Shin Rating, stated, “The group’s access to capital markets has weakened due to a short-term debt maturity structure and an excessive debt burden relative to cash flow.” He added, “Efforts to raise funds using held assets are also being delayed, and we assess that uncertainty has increased regarding the management of maturing debt, including securitized securities issued by affiliates.”

He further assessed, “Given the high level of financial interdependence across the group, the potential for liquidity risk to spread among affiliates also appears to have increased.”