JoongAng Group Bond Investors Claim JTBC Was Effectively in Capital Impairment Before Issuance

Bond investors in JoongAng Group affiliates, including the general programming channel JTBC, have urged financial authorities to conduct an investigation 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 JoongAng Group bond victims held a press conference at the Seoul Bar Association building in Jongno-gu this morning (July 13) and announced that they had submitted a written opinion to the Financial Supervisory Service (FSS) on July 10.

The document contains 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 team explained, "According to our own internal tally, there are approximately 450 individual accounts that invested in JoongAng Group corporate bonds, with total investments reaching about 76 billion won."

The legal team 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 closing of accounts."

They further stated, "JTBC has recorded large-scale losses for three consecutive years, and the audit reports also noted risks such as failure to meet financial covenants and liquidity risks in the event of a credit rating downgrade," adding that "these are facts that could have been confirmed through public disclosure materials alone."

The legal team claimed that Shinhan Securities, the lead underwriter, recognized these risks but concluded that "repayment of principal and interest would be manageable" and proceeded to underwrite the bond issuance.

"Shinhan Securities included the risk factors in its own corporate due diligence report but still presented a positive conclusion," the legal team said, adding that "the on-site inspection 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 clear risk warnings," and that "circumstances have been confirmed where IR materials focused on positive content were distributed to individual investors via KakaoTalk chat rooms managed by investment advisory firms just before the issuance."

Regarding Kiwoom Securities, which sold short-term corporate bonds, the legal team claimed that investor protection procedures did not function properly, as counselors directly guided and induced investors to register for "happy call" refusals.

"While numerous individual investors suffered massive losses, Shinhan Securities, Kiwoom Securities, and JTBC gained significant economic benefits," the legal team said, calling for an investigation by financial authorities.

They added that they have requested the investigation be expanded beyond Shinhan Securities and Kiwoom Securities to include Hanyang Securities, 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 declared a default on June 12 after failing to repay 20.6 billion won in securitized borrowings upon maturity.

Two days later, on June 14, JoongAng Holdings, Contentree JoongAng, JoongAng P&I, and Megabox JoongAng filed for rehabilitation procedures, followed by JTBC, the center of the crisis, on June 15.

The court accepted JTBC's application for the Autonomous Restructuring Support (ARS) program and postponed the decision on commencing rehabilitation procedures, while it decided to commence rehabilitation procedures for the other four companies.

JoongAng Group bond investors have recently begun legal action, including appointing former Financial Supervisory Service Governor Lee Bok-hyun (54, 32nd Judicial Research and Training Institute), a former prosecutor, as their legal representative.
※ Please note: This article was translated by AI and may contain errors.