This article was displayed on the ChosunBiz MoneyMove (MM) site at 4:14 p.m. on Mar. 26, 2026.
With the merger of Lotte Cinema and Megabox, the No. 2 and No. 3 players in Korea's movie theater market, struggling to gain momentum, a 400 billion won investment that the two companies had pursued on the premise of launching a combined entity has fallen through. As there was no guarantee of improved earnings, the sides tugged with the investor over providing additional collateral and ultimately failed to find common ground.
JoongAng Group had also pursued a plan for the holding company itself to raise 300 billion won in the form of a private loan, not only for Megabox, but that is also said to be at an impasse. In addition, the plan to sell Phoenix JoongAng to Hanwha Group is effectively on hold.
According to the investment banking (IB) industry on the 26th, private equity fund (PEF) manager IMM Credit & Solution (ICS) reviewed investing 300 billion to 400 billion won in the merged entity of Lotte Cinema and Megabox JoongAng but ultimately halted discussions. If the investment had gone through, the funds were expected to be paid in as early as the end of this year or early next year.
Lotte Group and JoongAng Group were said to have reviewed making additional capital contributions accordingly. The industry expected that each side would need to invest more than 100 billion won for the merged entity to normalize operations.
According to the industry, the biggest reason ICS halted the talks was insufficient credit enhancement. Megabox currently leases all of its theater buildings and thus has few assets that can be provided directly as collateral. It has sold owned real estate to reduce borrowing fund and improve liquidity.
The investor reportedly requested parent-level credit enhancement to compensate for the weak collateral capacity. But parent company Contentree JoongAng and holding company JoongAng Holdings are themselves in the midst of raising funds due to their own cash crunch. In addition, much of the JoongAng Holdings equity held by the owner family is already pledged as collateral in several places. There is a shortage of available asset that can be provided as collateral for credit enhancement.
An IB industry official said, "In addition, the theater investment also required discussions between JoongAng Group and Lotte Group, so the interests were more complicated than in a situation where a single corporations raises investment."
Another industry official noted, "From JoongAng Group's perspective, it would not have been welcome to shoulder interest in the mid-to-high 10% range while also having to provide more credit enhancement."
This is not the only case where JoongAng Group is in a tug-of-war with an investor over credit enhancement. Contentree JoongAng has been negotiating since September last year to raise 300 billion won from Ares, but it has only signed the term sheet (basic terms of the investment agreement) and has not yet found common ground. Because Ares is demanding additional collateral and that part of the 300 billion won investment be retained and not spent in case of emergency, the deal has not been finalized.
JoongAng Group has also been negotiating with Hanwha Group since the end of last year to sell Phoenix JoongAng and had planned to pay the acquisition price at the end of January this year, but the talks were delayed and are now effectively broken off. JoongAng Group is said to have sought an overall corporate value for Phoenix JoongAng (based on equity price) of about 250 billion won.
JoongAng Group must first address the maturity of Contentree JoongAng's convertible bonds (CB) repayment, which comes due on Apr. 30. Contentree JoongAng raised about 100 billion won in 2021 in the form of CBs from domestic private equity fund JKL Partners and must repay 118 billion won including interest. The maturity has already been extended twice.
Contentree JoongAng's subsidiary SLL JoongAng must also repay Praxis Capital Partners' 300 billion won investment and interest by this month. It had planned to repay 130 billion won first with funds raised from Ares.
Regarding this, JoongAng Group said, "Discussions are ongoing, and no final conclusion has been reached."