[Edaily Marketin, Reporter Song Seung-Hyeon ] JTBC, which is currently undergoing corporate rehabilitation proceedings, has begun the search for a new owner through an open competitive bidding process. The final bidding is scheduled for mid-January of next year, just two weeks before the deadline for submitting a rehabilitation plan to the court. Potential buyers must evaluate the regulations governing stakes in general programming channels, the company’s loss-making structure, and the issue of broadcast re-licensing—all within this tight timeframe.

According to investment banking (IB) industry sources on the 9th, EY Han Young, the lead advisor for the JTBC sale, issued a sale announcement that day and began accepting Letters of Intent (LOIs). This is a pre-reorganization merger and acquisition (M&A) structure in which the acquirer injects capital by receiving new shares through a third-party private placement and purchasing corporate bonds issued by JTBC, and uses this money to repay reorganization claims. The most likely approach is to reduce the equity stakes of existing shareholders, including the largest shareholder, Joongang Holdings (25.0% stake), and to settle any remaining debt not covered by the acquisition price through debt-to-equity conversion or debt forgiveness. Letters of Intent (LOIs) and Non-Disclosure Agreements (NDAs) will be accepted until 3:00 p.m. on the 4th of next month. Following this, preliminary due diligence will take place from December 7 through January 8 of next year, with binding acquisition proposals due on January 15; the preferred bidder will be selected in January. The deadline for JTBC to submit its reorganization plan is January 29.

Rather than using a “stalking horse” process—where a conditional prospective buyer is pre-selected—the selling party has opted for a competitive bidding process from the outset. It is reported that there were five to six potential buyers who made preliminary contact prior to the announcement, including companies from industries other than broadcasting and media. The decision was made to drive up the price through competition among bidders rather than minimizing the risk of the deal falling through.

Under the Broadcasting Act, the combined ownership of general programming channels by related parties cannot exceed 40 percent, and companies belonging to large conglomerates, as well as daily newspapers and news agencies, are capped at 30 percent. Even prospective buyers with sufficient financial resources face limits on the stake they can secure on their own. Within the industry, proposals are being discussed where strategic investors (SIs) and financial investors (FIs) would split the equity investment or provide additional funding by purchasing corporate bonds separately from the equity investment. However, if the proportion of corporate bonds increases, JTBC will be left with new debt even after its rehabilitation. Another variable is that, depending on the method of exercising joint voting rights, the arrangement may be subject to approval by the broadcasting authorities.

According to JTBC’s semi-annual report, consolidated operating revenue for the first half of this year was 190.1 billion won, a 4.3% increase from the same period last year (182.2 billion won); however, the operating loss more than doubled, rising from 11.4 billion won to 26.7 billion won. As of the end of June, consolidated total liabilities stood at 566.1 billion won, while total equity was 21.5 billion won, resulting in a debt-to-equity ratio of 2,628%. Equity includes 202.3 billion won in hybrid capital securities. Of this amount, 150 billion won was backed by credit guarantees from JoongAng Holdings and JoongAng Ilbo under a capital replenishment agreement, and JoongAng Holdings has provided a payment guarantee for the IOC Olympic broadcasting rights contract. The Korea Communications Commission has demanded that a business plan be submitted within six months for the re-licensing review. Under this structure, any acquirer would have to shoulder both the financial burden and the risk associated with re-licensing.

JTBC declared a default last June after failing to repay 20.6 billion won in securitized debt, due to a combination of a shrinking TV advertising market and the burden of Olympic and World Cup broadcasting rights. On August 28, the Seoul Bankruptcy Court decided to initiate rehabilitation proceedings and entrusted the company to the current management without appointing a separate administrator. JoongAng Ilbo, part of the same group, proceeded with a sale while undergoing a workout program, designating the Daewoo Kiwoom–CJ consortium as the preferred bidder; Shinsegae later joined the consortium. The sellers are highlighting the channel’s top news ratings among general programming channels and its intellectual property (IP) rights for dramas and variety shows as key strengths. The crux of this transaction lies in how much the general programming channel license—for which new entry is effectively blocked—will be reflected in the valuation of a company operating at a loss.