CJ OliveNetworks, Pursuing JoongAng Ilbo Acquisition, Secures New Corporate Credit Ratings

As CJ OliveNetworks, an affiliate of CJ Group pursuing the acquisition of JoongAng Ilbo, has consecutively acquired corporate credit ratings from two major domestic credit rating agencies, attention is focusing on the possibility of securing funds for the acquisition.

According to the credit rating industry today (October 22), CJ OliveNetworks was newly assigned an Issuer Credit Rating (ICR) of "A+, Stable" by Korea Ratings on October 16, followed by NICE Investors Service on October 21.

A company obtaining credit ratings from two rating agencies is typically a move seen when preparing to issue corporate bonds.

Public offering of corporate bonds generally requires bond credit ratings from at least two rating agencies, and securing corporate credit ratings in advance can help prepare for future issuances.

In particular, as the Daou Kiwoom-CJ Group consortium was selected as the preferred bidder for the acquisition of JoongAng Ilbo on October 19, speculations are emerging that this credit rating acquisition may have been made with fundraising for the takeover in mind.

However, according to industry sources, this credit rating acquisition is known to be aimed at utilization in bidding for new project contracts rather than issuing corporate bonds.

In fact, the rating contract with Korea Ratings was signed on September 21, about a month before being selected as the preferred bidder for the JoongAng Ilbo acquisition, and NICE Investors Service also stated that it had not been presented with any corporate bond issuance plans.

CJ OliveNetworks is an existing shareholder holding approximately a 9.2% stake in JoongAng Ilbo, and possesses the financial capacity to undertake additional investments.

NICE Investors Service also analyzed in this report that "if the acquisition of JoongAng Ilbo becomes a reality, a funding support burden could arise for CJ OliveNetworks depending on group-level decision-making."

As of the end of the first half of the year, cash and cash equivalents stood at 344.4 billion won, significantly exceeding borrowings (7.6 billion won), resulting in a net debt of minus (-) 336.8 billion won.

However, despite its abundant financial resources, the fact that CJ OliveNetworks is a great-granddaughter company of holding firm CJ serves as an obstacle to direct equity investment.

This is because CJ OliveNetworks is a great-granddaughter company 100% owned by CJ CGV, a subsidiary of holding company CJ, and thus subject to restrictions under the Fair Trade Act on the holding of shares in domestic affiliated companies by great-granddaughter companies.

Accordingly, if CJ Group injects additional funds into the acquisition of JoongAng Ilbo, methods such as making equity investments at the holding company or subsidiary level could be reviewed.

However, in this acquisition, measures to dilute the stakes of existing major shareholders through capital reduction and paid-in capital increases are being discussed, leaving the final investment entity and equity structure still uncertain.

(Photo provided by CJ OliveNetworks, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.