D-Day for final bidding in JoongAng Ilbo sale...all-out push to find a “new owner” during debt repayment moratorium [fnMarketWatch]

[Financial News]  JoongAng Ilbo is moving quickly to find a new owner and develop a plan to normalize its operations within the debt-repayment moratorium under its workout (creditor-led joint management process). The key challenge is no longer simply managing upcoming corporate bond maturities, but securing an investor who can inject new funds through a swift paid-in capital increase. With 129.4 billion won in corporate bonds due next year alone, candidates’ ability to mobilize funds and the timing of their actual payment of the capital-increase proceeds are seen as major factors that will determine the success of the sale. 
According to investment banking (IB) industry sources on the 19th, Samil PricewaterhouseCoopers, the sale’s lead adviser, plans to close final bidding that afternoon and select a preferred bidder this month. In the final bid, candidates will submit detailed proposals, including their offer prices and financing plans, based on the results of due diligence.
JoongAng Ilbo has a total of 147.4 billion won in outstanding corporate bonds. Maturities begin next month with 18 billion won, followed by 37 billion won in January next year and 7.4 billion won in February. A further 50 billion won is due in August next year and 35 billion won in November. Maturities next year alone total 129.4 billion won, or about 88% of the outstanding balance.
High funding costs are also a concern. The coupon rates on the bonds range from 5.8% to 7.1% annually. Annual nominal interest costs, based on the outstanding balance, are estimated at about 9.7 billion won. Some warn that liquidity pressures could grow further if the company struggles to refinance maturing bonds before its financial structure is normalized.
Earlier, in June, JoongAng Ilbo’s credit rating was downgraded in the wake of JTBC’s default, triggering events of default on 137 billion won in corporate bonds.  JoongAng Ilbo entered a workout (creditor-led joint management process) in July. The sale is structured not as an acquisition of the existing major shareholder’s stake, but as an injection of new funds through a third-party allotment of shares. The acquiring candidate’s ability to raise funds is important because the proceeds it pays for the capital increase can be used to improve JoongAng Ilbo’s financial structure.
Samil PricewaterhouseCoopers has selected six qualified acquisition candidates—Global Sae-A, Orion, Dow Technology, OK Financial Group, eBroadcasting and Geumbo Development—and has been conducting the sale process. The competitive landscape is also expected to shift as CJ Group, which did not participate in the preliminary bid, pursues a plan to form a consortium with the Dow-Kiwoom Group and enter the final bidding.
CJ Group is JoongAng Ilbo’s third-largest shareholder, holding a 9.24% stake through CJ OliveNetworks. The Dow-Kiwoom Group needs a co-acquisition partner, as it must take into account restrictions under the Newspaper Act on ownership stakes in general daily newspapers. Since only candidates that took part in the preliminary bid are eligible to submit a final bid, CJ Group is understood to be pursuing a joint acquisition with the Dow-Kiwoom Group, an existing candidate.
IB industry sources say the actual acquisition burden, including debt repayment and guarantees related to related parties, could approach 600 billion won. JoongAng Holdings, which is undergoing rehabilitation proceedings, holds the trademark rights to the JoongAng Ilbo masthead, so separate negotiations may be needed after the acquisition.
In particular, bidders are reportedly required to pay a bid bond of 10 billion won and submit details of their cash holdings for the final bid. The process is designed to verify not only their willingness to acquire the company but also their actual ability to mobilize funds.
A source in the IB industry explained, “The sale of JoongAng Ilbo is being expedited not simply because corporate bonds are coming due. The company needs to secure a new investor and draw up a plan to normalize its operations before the repayment schedule for debts deferred under the workout.” The source added, “It is important to quickly select a preferred bidder and settle on an investor capable of strengthening the company’s capital through a paid-in capital increase.”
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