[Edaily Marketin, Reporter Hur Jieun ] While the court decided to initiate rehabilitation proceedings for four affiliates of the JoongAng Group, it postponed its decision on whether to initiate proceedings for JTBC for one month. With JTBC appearing to be the only one to have stepped aside from court-supervised rehabilitation, doubts arose in the market as to whether even the court viewed JTBC’s prospects for rehabilitation as slim. However, experts assessed that the court had devised a sophisticated solution to prevent the erosion of asset value, taking into account the unique nature of a broadcasting company.

According to legal and investment banking (IB) industry sources on the 1st, the Seoul Bankruptcy Court’s Second Reorganization Division (Presiding Judge Jeong Jun-young) approved the initiation of reorganization proceedings the previous day for four companies: JoongAng Holdings, ContentreeJoongAng corp.(036420), Megabox JoongAng, and JoongAng P&I. However, regarding JTBC—which had declared a default after failing to repay 20.6 billion won in securitized debt—the court deferred its decision until the 30th and approved the company’s application for the Autonomous Restructuring Support (ARS0) program.

This differential treatment sparked a flurry of speculation in the market. Some interpreted it as the court effectively passing the buck to the company and its creditors, having concluded that even court intervention would be insufficient to save JTBC, while others suggested it was because JTBC’s remaining cash reserves had run dry, unlike other companies in the past where rehabilitation proceedings were initiated immediately upon application. Some even raised suspicions that the holding company was attempting to “cut off the tail” by isolating JTBC.

However, experts well-versed in reorganization proceedings offer a different perspective. They analyze that at the stage of the commencement decision, it is impossible to definitively determine liquidation value or the availability of cash; furthermore, this postponement is not a death sentence for JTBC but rather amounts to providing a legal safety net for its survival.

The Court’s Two-Track Approach, Taking into Account the Unique Nature of Broadcasting

The unique nature of the broadcasting industry is cited as the key reason the court suspended JTBC’s reorganization proceedings. Unlike general manufacturing or distribution sectors, the value of a broadcaster’s license-based assets—such as broadcasting licenses and programming rights—can be undermined simply by the fact that reorganization proceedings have been initiated. Once the initiation of reorganization proceedings is made official, advertisers may flee en masse, contracts with content production partners may collapse, and the company’s business value could evaporate in an instant.

The initiation of the ARS program is also interpreted as a result of JTBC being the only broadcaster to file for both rehabilitation and ARS at the outset. In effect, rather than proceeding directly to rehabilitation—a compulsory process—the court granted JTBC the opportunity to continue operating its broadcasting business normally through the ARS while voluntarily restructuring its debts with creditors.

In fact, separate from approving the ARS, the court has begun a valuation of JTBC. Han Young Accounting Firm, acting as the investigative committee, is currently assessing the circumstances that led JTBC to file for rehabilitation, as well as the value of its assets, going-concern value, and liquidation value. Although the results of this investigation have not yet been released, analysts suggest that the court likely granted a one-month grace period after determining that the going-concern value exceeded the liquidation value.

A lawyer specializing in rehabilitation explained, “The court did not intentionally give JTBC special treatment; the proceedings simply proceeded as the company had requested,” adding, “ARS is not a system that the court can apply on its own initiative unless the debtor files a request.”

On the other hand, the court’s decision to immediately initiate rehabilitation proceedings for four affiliates—including the holding company, Joongang Holdings, and ContentreeJoongAng corp.—is interpreted as a measure to block the upper echelons of the corporate structure. These entities are currently entangled in overlapping inter-affiliate loans and debt guarantees. A capital outflow or asset disposal at one company could simultaneously infringe upon the rights of creditors at other affiliates. It is highly likely that the court determined there was a strong need to freeze funds through a comprehensive injunction and asset freeze by initiating reorganization proceedings.

Joongang Group Accelerates Self-Rescue Efforts… Can JTBC Survive on Its Own

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The court has granted JTBC a one-month grace period. This period can be extended upon application or at the court’s discretion; while the standard total suspension period is up to three months, further extensions are possible if the court determines that significant progress has been made in negotiations. During this period, JTBC must negotiate debt restructuring with its major financial creditors to devise an effective self-rescue plan.

Currently, the JoongAng Group is moving forward with the sale of its corporate headquarters, including the JoongAng Ilbo Building, and at the same time, the possibility of selling controlling stakes in JoongAng Ilbo and SLL JoongAng is also being raised. Observers suggest that if such asset liquidation materializes, it could provide some breathing room for JTBC’s debt restructuring. However, there are also significant concerns that it will be difficult to achieve tangible results at the group level within a one-month timeframe.

Lee Min-kyu, managing partner at HanSu Law Firm, stated, “The dichotomy of ‘court-supervised restructuring or closure’ does not reflect reality,” adding, “The fewer creditors a small or medium-sized enterprise or self-employed individual has, the more likely they are to recover quickly through voluntary negotiations.”