Koramco REITs Management and Trust requested the return of the performance bond it paid in connection with the acquisition of JoongAng Group real estate. The move follows the difficulty of closing the transaction, initially slated for the end of August, after JoongAng Group entered corporate rehabilitation. The two sides plan to maintain the existing memorandum of understanding (MOU) and proceed with the transaction after the court permits the disposal of assets.
On the 12th, according to the investment bank (IB) industry, Koramco REITs Management and Trust recently asked JoongAng Holdings to return a 2 billion won performance bond.
This is not so much a step to withdraw the transaction as it is because the originally planned transaction timeline has become practically impossible. The two sides signed an MOU in May this year for three assets—the two office buildings of JoongAng Ilbo and JTBC in Sangam-dong, Mapo-gu, Seoul, and the Ilsan studio in Goyang, Gyeonggi—and planned to complete the transaction by the end of August.
However, the situation changed at the end of last month when JoongAng Holdings, Contentree JoongAng, Megabox JoongAng, and JoongAng P&I entered corporate rehabilitation. To dispose of the assets of corporations under rehabilitation, court approval is required, making it virtually impossible to complete the closing by the end of August as originally scheduled.
Accordingly, Koramco REITs Management and Trust reportedly agreed to first receive a return of the performance bond deposited to secure the transaction schedule, while keeping the MOU in place. Once the court's decision comes out, the parties plan to renegotiate specific transaction terms and timelines.
This transaction is a core asset securitization effort promoted by JoongAng Group to secure liquidity. The assets for sale include the two office buildings of JoongAng Ilbo and JTBC in Sangam-dong, Seoul, and production facilities in Ilsan, Goyang, Gyeonggi, with the transaction size known to be about 550 billion won.
The industry expects that, since corporate rehabilitation proceedings are underway, the method of asset sale will be determined by the court's decision. The court could permit the transaction based on the existing contract, and some analysts do not rule out the possibility that other sale methods, such as an open competitive bidding during the rehabilitation plan process, could be considered.
A Koramco REITs Management and Trust official said, "The 2 billion won was a soft deposit that was originally placed on the premise of a transaction closing at the end of August," adding, "Given that the rehabilitation process now requires a court decision, we could not complete the transaction within the schedule, so we first requested the return of the deposit."
The official added, "We have not withdrawn the transaction, and the MOU remains in place," and explained, "After the court's decision, we plan to mutually discuss whether to proceed with the transaction and the specific terms."