[Funding] CJ CGV Refinances 180 Billion KRW in Lease Deposit Securitization Loans

On the 18th, CGV Yongsan I'Park Mall in Seoul was less crowded than usual. On this day, CGV announced that it will raise movie ticket prices by 1,000 won starting from the 2nd of next month to overcome the crisis caused by the prolonged COVID-19 situation. Photo by Moon Honam munonam@

[Asia Economy Reporter Lim Jeong-su] CJ CGV extended the maturity of securitized borrowings worth 180 billion KRW, raised using the lease deposit of its multiplex cinema buildings, by three years. Amid a decline in credit rating due to COVID-19, the maturities of borrowings are coming due one after another, causing difficulties in repaying debts and securing funds necessary for operations.

According to the investment banking (IB) industry on the 31st, CJ CGV refinanced securitized borrowings worth 180 billion KRW underwritten by Kiwoom Securities. This is a method of securitizing the lease deposit CJ CGV paid to the JB Asset Management fund as rent for cinema buildings. CJ CGV pays the fund the lease deposit along with usage fees corresponding to interest.

The previous securitized borrowings amounted to 196 billion KRW, and during this refinancing process, it was reduced by about 16 billion KRW to 180 billion KRW. It is interpreted that part of the lease deposit transferred to JB Asset Management was repaid. CJ CGV extended the maturity of this securitized borrowing to August 2024 and signed an agreement to repurchase the lease deposit at fair value upon maturity.

Earlier in June, CJ CGV raised 300 billion KRW by issuing perpetual convertible bonds (perpetual CBs). Separately, it is known that CJ CGV is continuously contacting the IB industry to raise funds due to the heavy burden of short-term debt repayment.

As of the end of June, CJ CGV’s consolidated borrowings totaled 3.27 trillion KRW, an increase of more than 200 billion KRW from 3.055 trillion KRW at the end of 2019 before COVID-19. Short-term borrowings (including current portion of long-term debt) that must be repaid or refinanced within one year amount to 890 billion KRW.

Meanwhile, cash flow has deteriorated due to worsening performance. Sales, which approached 2 trillion KRW in 2019, plummeted to 580 billion KRW last year, the first year of COVID-19. Operating profit turned into a loss of 389 billion KRW from a profit of 122 billion KRW during the same period, and this year, a loss of 202.2 billion KRW was recorded in the first half alone.

An IB industry official said, "Although performance is recovering as cinema audiences increase recently, it is difficult to expect a recovery to pre-COVID-19 levels," and added, "Fundraising to repay borrowings and secure operating funds will continue."

This content was produced with the assistance of AI translation services.