JoongAng Ilbo Takeover Battle: 'Ability to Inject Funds' Is Key to Winning... Workout Turnaround Put to the Test [fn Market Watch]

[Financial News] In the battle to acquire JoongAng Ilbo, the financial capacity to inject new funds through a rights offering after the acquisition is emerging as a key factor, on a par with the purchase price. Since JoongAng Ilbo must draw up a turnaround plan within the debt repayment moratorium under its workout (corporate financial restructuring) program, securing an investor able to quickly replenish its capital has become more important than simply offering a high price.
According to investment banking industry sources on the 19th, the seller of JoongAng Ilbo is set to close the final-round bidding at 3 p.m. today and begin evaluating proposals submitted by prospective buyers. After tallying the bids and completing its evaluation, the seller is expected to convey the relevant details to the creditors, including Hana Bank, the lead creditor bank.
The central issue in the sale is the timeline for a turnaround under the workout. JoongAng Ilbo’s debt repayments have been suspended under the workout process, and it faces the task of securing a new investor and drawing up a concrete turnaround plan—including capital replenishment and debt restructuring—within the moratorium period.
In particular, the seller is prioritizing the search for an investor able to inject funds through a swift rights offering. This means that not only the price offered by prospective buyers but also their actual ability to pay in the funds and the feasibility of carrying out the capital increase could be important factors in whether the deal is completed.
A source in the investment banking industry explained, “It is important to draw up a turnaround plan within the debt repayment moratorium under the workout,” and added, “A process is needed to select an investor who will inject funds through a swift rights offering.”
The burden of JoongAng Ilbo’s maturing corporate bonds is also a financial factor prospective buyers must consider. JoongAng Ilbo previously issued corporate bonds totaling 147.4 billion won, of which 62.4 billion won will mature by February next year. The total amount maturing next year is 129.4 billion won. Funding rates on some of the bonds are understood to be as high as 7.1% per year.
Addressing its maturing corporate bonds is not the only challenge JoongAng Ilbo must resolve. It also needs to work with creditors on a turnaround plan for debt whose repayment has been suspended under the workout. Corporate bonds may also require a separate debt-restructuring process, depending on factors such as who holds them. The new acquirer will therefore need to inject funds through a rights offering while also addressing bond repayments and the restructuring of existing financial debt.
The size of the rights offering proposed by prospective buyers and their actual ability to pay in the funds are seen as key factors in this takeover battle. Since the sale of JoongAng Ilbo is being conducted through a third-party allotment rights offering, the subscription proceeds paid by the acquirer for the newly issued shares will be used to improve the company’s financial structure. However, financial burdens such as remaining borrowings and payment guarantees may persist even after debt is repaid through the capital increase, so prospective buyers are expected to factor in additional funding needs after the acquisition.
Industry observers say the outcome of the takeover battle will depend on prospective buyers’ ability to raise funds and the speed at which they can execute the transaction. Since the debt repayment moratorium under the workout cannot continue indefinitely, follow-up steps, including investment commitments and a rights offering, will need to proceed swiftly even after a preferred negotiating bidder is selected.
Meanwhile, the seller plans to open and evaluate the proposals after completing the receipt of bids. The evaluation results are expected to be conveyed to Hana Bank, the lead creditor bank. JoongAng Ilbo is reportedly planning to make an official announcement as soon as the bidding results are finalized. The plan is to select a preferred negotiating bidder by the end of this month, though the specific date has not been set.
[email protected] Kim Hyun-jung Reporter