ContentreeJoongAng, Megabox and Other Companies in the JoongAng Group File for Corporate Rehabilitation in a String… Trading Suspended

ContentreeJoongAng (036420) and its subsidiary Megabox, both companies in the JoongAng Group, have started corporate rehabilitation procedures and had their stock trading halted.

On Sept. 15, according to South Korea’s Financial Supervisory Service’s electronic disclosure system and legal circles, a total of four companies in the JoongAng Group—including JoongAng Holdings, the group’s holding company, as well as key affiliates ContentreeJoongAng, Megabox JoongAng and JoongAng P&I—submitted to the Seoul Bankruptcy Court on Sept. 14 applications for the start of corporate rehabilitation procedures, as well as for preservation measures and comprehensive stay orders. As a result, the Korea Exchange immediately suspended stock trading of ContentreeJoongAng starting Sept. 15.

The large-scale rehabilitation filing appears to be a step taken as the groupwide liquidity crunch has become real. Earlier, another key affiliate, JTBC, was put in a default (failure to meet debt obligations) risk situation even though its borrowing maturity of about 20.6 billion won arrived on Sept. 12, but it could not repay it on time. As a result, JTBC’s credit rating fell sharply from the prior “BBB0” to “CCC,” a speculative grade where the possibility of default is relatively high. The group seems to have spread JTBC’s funding squeeze into a chain of problems across the entire group.

ContentreeJoongAng said its reason for filing for rehabilitation was “to normalize management and preserve the value as a going concern in the future.” Industry observers analyze that this goes beyond a simple funding problem at an individual affiliate and instead marks the start of a major overhaul of the group’s financial structure. The Seoul Bankruptcy Court’s review will determine, in the end, whether each company’s rehabilitation procedure will be initiated.