Following its private bonds, JoongAng Ilbo has also fallen into a chain event of default (EOD) on its public corporate bonds. As a liquidity crisis materialized due to the financial burden of supporting JoongAng Group affiliates, credit rating agencies downgraded JoongAng Ilbo's credit rating to "CCC," effectively one notch above default. As a result, JoongAng Ilbo can now face early redemption demands on 137 billion won in public bonds before maturity.
According to the credit rating industry on the 17th, Korea Ratings and NICE Investors Service downgraded JoongAng Ilbo's senior unsecured bond rating to "CCC" from "B-." The rating outlook remained on "negative watch," leaving open the possibility of further downgrades.
Short-term creditworthiness also fell in tandem. For commercial paper (CP) and electronic short-term bonds, Korea Ratings kept the rating at "C," while NICE Investors Service cut it one notch further to "C" from "B-."
The episode began with a downgrade of JoongAng Ilbo's short-term credit rating. Earlier, on the 12th, NICE Investors Service lowered JoongAng Ilbo's short-term rating to "B-" from "A3." As this failed to meet the contractually agreed rating-maintenance covenant, an EOD event first occurred on privately placed bonds issued by JoongAng Ilbo.
The problem is that the fallout spread to public bonds. In a disclosure the previous day, JoongAng Ilbo said additional EOD events had occurred on its public bonds totaling 137 billion won: 18 billion won for the 43-2nd, 34 billion won for the 46th, 35 billion won for the 47th, and 50 billion won for the 51st. With EOD triggered, creditors can demand repayment before maturity, further increasing JoongAng Ilbo's short-term funding pressure.
Yang Hee-cheol, senior researcher at Korea Ratings, said, "We judge that uncertainty over liquidity response capacity has expanded markedly, as the burden of early redemption on the bonds under review is becoming a reality."
However, in a statement the same day, JoongAng Ilbo explained regarding the EOD on the four corporate bonds that "the maturities of the bonds in question have not yet arrived, and this is unrelated to the company's substantive payment capacity."
It added, "JoongAng Ilbo, which is pursuing a workout, informs you that, in order to maintain fairness among creditors under the relevant procedures, it cannot comply with this (pre-maturity redemption requests)."