▲ JoongAng Ilbo and JTBC Headquarters
Bond investors in JoongAng Group affiliates, including the general programming channel JTBC, urged financial authorities today (July 13) to conduct an inspection into the entire process of issuing and selling corporate bonds, claiming that "JTBC was effectively in a state of complete capital impairment even before the bonds were issued."
The joint legal counsel for the victims of JoongAng Group bonds held a press conference this morning at the Seoul Bar Association building in Jongno-gu, Seoul, and announced that they had submitted a written opinion to the Financial Supervisory Service (FSS) on July 10.
The document includes the status of damages for 250 applicants whose losses have been confirmed, totaling approximately 32.52 billion won, as well as requests for the financial authorities.
The legal counsel explained, "According to our own internal tally, there are approximately 450 individual accounts that invested in JoongAng Group corporate bonds, with total investments amounting to about 76 billion won."
The legal counsel argued, "Excluding 154.4 billion won in hybrid securities acquired by affiliates and classified as capital, JTBC's actual total equity was negative 135.4 billion won," adding that "the company avoided complete capital impairment by issuing 40 billion won in hybrid securities just before the settlement."
They further stated, "JTBC has recorded large-scale losses for three consecutive years, and its audit reports mentioned liquidity risks in the event of failure to meet financial covenants or a downgrade in credit ratings," noting that "these were facts that could have been verified through public disclosure documents alone."
The legal counsel claimed that Shinhan Securities, the lead underwriter, proceeded with the bond issuance after concluding that "repayment of principal and interest would be manageable," despite being aware of these risks.
"Shinhan Securities included the risk factors in its own corporate due diligence report but still presented a positive conclusion," the counsel stated, adding that "the on-site due diligence was replaced by a one-day conference call."
They also alleged, "Even after the capital impairment was disclosed, corporate bond trading continued on the securities firm's application without any specific risk warnings," and that "circumstances have been confirmed where IR materials focusing on positive content were distributed to individual investors through KakaoTalk chat rooms managed by investment advisory firms just before the issuance."
Regarding Kiwoom Securities, which sold short-term bonds, the counsel claimed that investor protection procedures did not function properly, as counselors directly guided or induced investors to opt out of the happy call service.
"While many individual investors suffered massive losses, Shinhan Securities, Kiwoom Securities, and JTBC gained significant economic benefits," the counsel said, calling for an inspection by financial authorities.
They added that they have requested the scope of the inspection be expanded to include not only Shinhan Securities and Kiwoom Securities but also Hanyang Securities, over-the-counter brokerage firms, investment advisory firms, and credit rating agencies. They also requested the consolidation of individual complaints and immediate measures to preserve key evidence, such as emails.
The JoongAng Group financial crisis began when JTBC failed to repay 20.6 billion won in securitized borrowings upon maturity on June 12, leading to a declaration of default.
Two days later, on June 14, JoongAng Holdings, Contentree JoongAng, JoongAng P&I, and Megabox JoongAng filed for rehabilitation procedures, followed by JTBC, the epicenter of the crisis, on June 15.
The court accepted JTBC's application for the Autonomous Restructuring Support (ARS) program and deferred its decision on the commencement of rehabilitation procedures, while it decided to commence rehabilitation procedures for the other four entities.
Bond investors of JoongAng Group have recently begun legal action, including the appointment of former Financial Supervisory Service Governor Lee Bok-hyun (54, 32nd Judicial Research and Training Institute), who is a former prosecutor, as their legal representative.
(Photo: Provided by JoongAng Group, Yonhap News)
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