JoongAng Group bondholders' legal representatives submitted an accounting review request to South Korea's Financial Supervisory Service (FSS) on the 24th, targeting five group affiliates including JTBC, JoongAng Holdings, Dabo JoongAng, Contentree JoongAng, and Megabox JoongAng, the legal team announced on the 26th. The request challenges the equity classification of 226 billion won in hybrid securities JTBC issued across nine occasions starting in 2023, with most purchasers being affiliates or special purpose corporations (SPCs) backed by affiliate credit. The review demand follows JTBC's default on 20.6 billion won in securitized loans on the 12th of last month, which triggered restructuring filings across the JoongAng Group.
Legal Team Submits FSS Review Request Targeting Five JoongAng Affiliates
The legal representatives filed the review request with the FSS on the 24th, seeking examination of financial statements and audit reports for JTBC, JoongAng Holdings, Dabo JoongAng, Contentree JoongAng, and Megabox JoongAng. The legal team announced the submission on the 26th.
Bondholders Question Hybrid Securities Equity Classification
According to the legal team, JTBC issued 226 billion won in hybrid securities across nine occasions starting in 2023. Most purchasers were group affiliates or SPCs that received credit enhancements from affiliates. The legal team questioned whether classifying these hybrid securities as equity was appropriate, requesting the FSS verify through review whether the company used book equity to conceal capital impairment while selling bonds to individual investors.
Alleged Mismatch Between Disclosed and Actual Fund Usage
The legal team identified discrepancies between disclosed fund usage purposes and actual usage. JTBC disclosed the purpose as operating funds when issuing 20 billion won in hybrid securities in March, but the legal team stated multiple instances were confirmed where the funds were used for call option situations involving 20 billion won in hybrid securities held by JoongAng Holdings.
JTBC Default Triggers Group-Wide Restructuring Filings
The JoongAng Group financial crisis began when JTBC declared default after failing to repay 20.6 billion won in securitized loans at maturity on the 12th of last month. On the 14th, JoongAng Holdings, Contentree JoongAng, JoongAng P&I, and Megabox JoongAng filed for court receivership, followed by JTBC on the 15th. The court approved receivership proceedings for the four entities excluding JTBC.
FAQ
What did JoongAng Group bondholders request from the FSS on the 24th?
Bondholders' legal representatives submitted an accounting review request targeting five JoongAng Group affiliates' financial statements and audit reports, announced on the 26th. The request challenges the equity classification of 226 billion won in hybrid securities JTBC issued starting in 2023.
Why did the JoongAng Group financial crisis begin?
The crisis began when JTBC declared default after failing to repay 20.6 billion won in securitized loans at maturity on the 12th of last month. This triggered restructuring filings by five group entities on the 14th and 15th.
