ContentreeJoongAng seeks loans from multiple financial investors

Curious Partners discussed investment before rehabilitation filing

Joongang Group-level collateral seen as key condition

ContentreeJoongAng corporate identity logo [ContentreeJoongAng]
ContentreeJoongAng corporate identity logo [ContentreeJoongAng]

ContentreeJoongAng, which has filed for court receivership, is pursuing debtor-in-possession (DIP) financing to secure liquidity. The company plans to use the new funds to stabilize its cash position before pressing ahead with asset sales and affiliate restructuring.

According to investment banking industry sources Wednesday, private equity fund operator Curious Partners is reviewing a plan to provide DIP financing to ContentreeJoongAng. Joongang Group is understood to be sounding out multiple financial investors, including Curious Partners, about the possibility of extending DIP loans.

DIP financing refers to the raising of new funds to secure operating capital during corporate rehabilitation proceedings. Under South Korea's Debtor Rehabilitation and Bankruptcy Act, a company that has applied for rehabilitation may raise funds through DIP financing with court approval, even before proceedings formally begin. Because DIP financing is emergency capital extended at considerable risk, it is treated as a common-benefit claim that takes priority over existing rehabilitation claims in repayment.

Up until just before filing for rehabilitation, ContentreeJoongAng had been in close talks with multiple investors to raise 500 billion won ($325 million) to improve its financial structure. Curious Partners was among the key candidates that received a request from ContentreeJoongAng and was conducting investment due diligence at the time.

However, those investment discussions were effectively halted after ContentreeJoongAng, Joongang Holdings, Joongang P&I, Megabox Joongang, JTBC and other core Joongang Group affiliates filed for rehabilitation. DIP financing — which supplies new operating funds in parallel with rehabilitation proceedings — has since emerged as an alternative. In effect, discussions that had centered on improving the financial structure before the filing shifted in nature to securing emergency liquidity after it.

Curious Partners is well known in the industry as a private equity fund operator with deep experience in corporate restructuring. Last year it provided 60 billion won in DIP financing to Homeplus. The Seoul Rehabilitation Court approved the financing after consulting the management committee and creditors' committee, and the funds were used as operating capital, including for payments to small merchants.

The rationale for prioritizing ContentreeJoongAng over other affiliates for an immediate capital injection is clear. ContentreeJoongAng serves as the intermediate holding company controlling Joongang Group's content business, with subsidiaries including SLL Joongang and Megabox Joongang. If ContentreeJoongAng's normal operations and liquidity are disrupted during rehabilitation, support for affiliates and the flow of funds within the group would inevitably be thrown into disarray.

Joongang Group is expected to use DIP financing to get through the immediate liquidity crunch and then accelerate asset sales and affiliate restructuring. Market participants have cited the possible sale of SLL Joongang — held by ContentreeJoongAng — or SLL Joongang's stake in the streaming service Tving as plausible scenarios. ContentreeJoongAng selected a lead manager for the sale of SLL Joongang last year and continued discussions on a sale at a price below 1 trillion won through early this year.

Legal experts say that pursuing DIP financing early in the rehabilitation process can be one way to improve the chances of a successful turnaround. "If a company filing for rehabilitation moves quickly to arrange and execute a new funding plan, it can signal a strong will to rehabilitate and that the going-concern value is substantial," one legal industry official said. "If a concrete plan is in place, the court is likely to grant approval promptly."

The key variables are collateral and funding conditions. Because DIP financing is ultimately a form of lending, investors need assurance of repayment security. Real estate, subsidiary stakes and content intellectual property held by ContentreeJoongAng and Joongang Group have been mentioned as potential collateral.

"From an investor's perspective, even a DIP loan requires confidence in the collateral and the source of repayment," one investment banking industry official said. "Collateral arrangements and contract terms will be the critical variables in determining whether the loan goes through."

ContentreeJoongAng said it has "nothing concrete to announce and is exploring various options."

Meanwhile, the Seoul Rehabilitation Court's Second Rehabilitation Division, presided over by Chief Judge Jeong Jun-yeong, conducted hearings with representatives of the companies that filed for rehabilitation — including Joongang Holdings and ContentreeJoongAng — on Wednesday and is reviewing whether to formally open rehabilitation proceedings.


park.jiyeong@heraldcorp.com
an@heraldcorp.com