Rehabilitation fallout from JoongAng Group spreads to mid-sized securities firms [fn Market Watch]

[Financial News] The impact of rehabilitation filings by key affiliates of JoongAng Group is spreading to mid-sized securities firms.
According to the financial investment industry and NICE Credit Rating on the 16th, Hanyang Securities Co., Ltd. was found to hold 84 billion won in exposure to JoongAng Group. This consists of 54 billion won related to JTBC and 30 billion won related to JoongAng Ilbo. That amounts to about 13% of Hanyang Securities' equity capital of 647.8 billion won as of the end of March this year.
As JTBC has filed for rehabilitation proceedings, concerns are rising that the quality of the related receivables could deteriorate and that provisions may need to increase. However, Hanyang Securities has secured collateral in the form of receivables from JTBC's program supply contracts, contract payments related to the Olympic Games broadcasting rights, a lease deposit for JTBC's office building, and its stake in SLL.
The 36 billion won in corporate commercial paper (CP) tied to JTBC is backed by receivables from broadcasting program supply contracts. Those receivables are managed through a trust account and are said to generate about 6 billion won in cash each month. Hanyang Securities plans to recover the bonds by the end of this year using those funds.
The 18 billion won securitization exposure is also secured by a claim for the return of contract payments from NAVER related to the Olympic Games broadcasting rights.
The 30 billion won in corporate commercial paper tied to JoongAng Ilbo is backed by receivables and deposit refund claims of Townboard Joongang Co., Ltd., a wholly owned subsidiary of JoongAng Ilbo. Hanyang Securities has also secured a pledge over Kakao convertible bonds (CB) and its stake in Townboard Joongang Co., Ltd.
In fact, Hanyang Securities reportedly recovered 1.6 billion won from JTBC-related bonds and 4 billion won from JoongAng Ilbo-related bonds on the day.
The rehabilitation fallout from JoongAng Group is also affecting iM Securities. According to the industry, iM Securities extended a 5 billion won stock-backed loan to Jungang P&I in March. The pledged shares amount to about 870,000 shares, and the loan matures on the 23rd.
Since the first loan was extended in June last year, iM Securities had renewed the contract every three months. But with Jungang P&I entering rehabilitation proceedings, it has become unclear whether the loan can be recovered.
NICE Credit Rating said that the currently confirmed amount of direct credit exposure alone is not enough to undermine the financial stability of the broader financial sector. However, it noted that JoongAng Group's total debt stands at about 2.8 trillion won, so the actual risk exposure could be larger when indirect exposure through asset-backed securities, funds, and private equity funds (PEFs) is taken into account.
Meanwhile, financial institutions' credit exposure to the five companies that filed for rehabilitation proceedings, including JoongAng Holdings, JTBC, ContentreeJoongAng, Megabox Joongang, and Jungang P&I, amounts to about 800 billion won. Based on the eight major companies, including JoongAng Ilbo, SLL, and JoongAng Ilbo M&P, the total reaches 1.32 trillion won.
By sector, exposure in the banking sector was the largest at 832.9 billion won, followed by Specialized financial institutions at 164.2 billion won, the securities industry at 125.1 billion won, and Specialized Credit Finance Companies at 79.7 billion won.
khj91@fnnews.com Kim Hyun-jung Reporter