JoongAng Group Bond Investors Raise "Accounting Concerns"... Request Audit Review by Financial Supervisory Service
Bond investors in JTBC and other JoongAng Group affiliates have requested an accounting audit review by the Financial Supervisory Service.
The legal team announced on the 26th that they submitted a request for an audit review to the Financial Supervisory Service on the 24th regarding the financial statements and audit reports of five JoongAng Group affiliates: JTBC, JoongAng Holdings, Davo JoongAng, Contentree JoongAng, and Megabox JoongAng.
According to the legal team, from 2023, JTBC issued a total of nine hybrid capital securities worth 226 billion won, most of which were reportedly underwritten by group affiliates or special purpose companies (SPCs) backed by the credit of the affiliates.
The legal team raised questions about whether classifying these hybrid capital securities as equity was appropriate. They called for a review to verify whether the company used these book assets to conceal a capital impairment situation and sold bonds to individuals under such circumstances.
The mismatch between the disclosed purpose of fund usage and actual usage was also cited as a problem. The legal team pointed out that in March, JTBC issued 20 billion won in hybrid capital securities, disclosing the purpose as operating funds, but there were multiple indications that the proceeds were used for situations such as the call option on 20 billion won worth of hybrid capital securities held by JoongAng Holdings.
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The JoongAng Group’s financial crisis began when JTBC declared default on June 12 by failing to repay 20.6 billion won in securitized borrowings at maturity. On June 14, JoongAng Holdings, Contentree JoongAng, JoongAng PNI, and Megabox JoongAng filed for commencement of rehabilitation proceedings, followed by JTBC on June 15. The court approved initiation of rehabilitation proceedings for JTBC and the other four affiliates.
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