Korea's online video service (OTT) corporation Watcha is pushing to appoint a chief restructuring officer (CRO) during its rehabilitation process. It is also reported that it is exploring overseas mergers and acquisitions (M&A). This is interpreted as a way for domestic OTT corporations to seek management stabilization through overseas investors as they each develop their business.
According to the OTT industry on the 19th, Watcha submitted an application for CRO appointment permission to the Seoul Bankruptcy Court on the 10th. The CRO is an external advisor who provides guidance on the company's rehabilitation process and overall restructuring, and supports the drafting of self-rehabilitation plans. The CRO also verifies and supervises the company's financial condition and normalization plans, explaining these to creditors and other stakeholders.
Since 2011, the courts have recommended that if the management of a corporation undergoing rehabilitation serves as a procedural manager, external experts should participate through the appointment of a CRO. This is to allow existing management to focus on business activities and to enhance the efficiency of the rehabilitation process. There are also advantages such as securing the trust of creditors and the court, and ensuring that the restructuring process of the company is managed transparently.
Watcha has not appointed a separate manager, and CEO Park Tae-hoon continues to manage as the procedural manager. It is reported that CEO Park submitted an application to the court requesting the appointment of a CRO. This is interpreted as a measure to enhance transparency in managing financial conditions and to build trust in the process of securing potential investors and acquisition candidates.
Recently, major corporations that have entered rehabilitation procedures have appointed CROs. The court has authorized the appointment of CROs for TMON and WeMakePrice, as well as Homeplus.
An M&A specialist lawyer said, "The appointment of a CRO is not mandatory, but if existing management proceeds with the rehabilitation process as the procedural manager, problems may arise such as executing funds without reporting. Therefore, the court is in a situation where it appoints a CRO to oversee this."
Watcha is also reviewing the possibility of M&A with foreign corporations. CEO Park is reported to be planning a business trip abroad this month or early next month.
In Korea, operators such as Netflix, Coupang Play, Disney+, Tving, and Wavve have already established themselves and are focused on producing their own content. For domestic corporations, it is difficult to find the acquisition of Watcha attractive due to its low market share and inability to demonstrate differentiated competitiveness.
The remaining option is foreign corporations. Watcha is reportedly exploring the possibility of collaboration with foreign corporations and reviewing ways to secure acquirers or strategic partners. If new investors emerge in the foreign market, it could serve as a driving force to enhance Watcha's rehabilitation potential.
An industry official noted, "Domestic OTT operators are effectively in a saturated state, and due to poor economic conditions, there are not many corporations willing to invest in content. However, there may be places abroad showing interest in the OTT and content business centered around Korea due to the popularity of K-content."
Founded in 2011, Watcha started with personalized movie recommendation services and launched streaming services in 2016. While it attracted many users by showing strengths in movie ratings, it began to lose market share as competition in the OTT market intensified.
In 2021, it raised 49 billion won in convertible bond (CB) investments from major venture capital and individual investors, but was unable to repay the principal and interest by the maturity date in November last year. Watcha's creditor, Insight Ventures, submitted a rehabilitation application to the court, which decided to initiate rehabilitation procedures on the 4th.