JoongAng Ilbo enters workout process, eyes sale of controlling stake

JoongAng Ilbo has begun a corporate restructuring process after creditors approved the launch of a workout program aimed at normalizing its operations.

Financial creditors, led by lead creditor Hana Bank, held a first meeting Friday and agreed through a written resolution to initiate the workout for JoongAng Ilbo.

Under relevant laws, a workout begins when creditors holding at least three-quarters of total financial claims give their consent. As of 6 p.m. Friday, creditors representing more than 75 percent of outstanding claims had voted in favor.

Creditors' exercise of claims has been suspended for three months. JoongAng Ilbo will now pursue management normalization through negotiations with the creditor group rather than going through court receivership.

The newspaper plans to draw up a management normalization plan based on an accounting firm audit, after which it will implement specific measures with the creditor group's approval.

JoongAng Ilbo applied to its creditors for a workout on June 19 after its credit rating was downgraded and liquidity problems surfaced in the wake of a broader management crisis at JoongAng Group.

While five JoongAng Group affiliates — JTBC, JoongAng Holdings, ContentreeJoongAng, Megabox JoongAng and JoongAng P&I — filed for court receivership, JoongAng Ilbo has maintained that it would resolve its temporary liquidity problems and improve its financial structure through negotiations with creditors.

The self-rescue plan JoongAng Ilbo presented to creditors includes generating operating cash flow through deep cost cuts, selling real estate holdings and divesting a controlling ownership stake.

Cost-cutting measures include a hiring freeze, partial salary reductions for executives, the retirement of some executives, a reduction in newspaper print volume and a halt to non-essential investment spending.

The company also outlined revenue-expansion measures. It plans to broaden its income sources through newspaper advertising, its elevator advertising medium "Town Board" and outdoor advertising, while more than doubling subscribers to its digital paid subscription service "The JoongAng Plus" from 70,000 this year to over 140,000 by 2029.

It also plans to raise a total of 66.4 billion won ($44.1 million) by selling stakes in wholly owned subsidiaries and land in Taean-gun, South Chungcheong Province.

JoongAng Ilbo has also decided to pursue talks with potential acquirers about transferring management control away from the current founding family.

JoongAng Holdings, which holds a 64.7 percent stake, is currently JoongAng Ilbo's largest shareholder. The founding family controls JoongAng Holdings, with Vice Chairman Hong Jung-do holding 55.8 percent, ContentreeJoongAng CEO Hong Jung-in holding 37.2 percent and JoongAng Holdings Chairman Hong Seok-hyun holding 7 percent.