NICE Investors Service Downgrades JoongAng Ilbo's Long-Term Credit Rating Outlook to 'Negative'

Long-term Credit Rating Maintained at 'BBB'

On May 15, NICE Investors Service announced that it had downgraded the outlook on JoongAng Ilbo's long-term credit rating from 'Stable' to 'Negative'.

On this day, NICE Investors Service maintained JoongAng Ilbo's long-term credit rating at BBB through its regular evaluation of senior unsecured corporate bonds, but downgraded the rating outlook from 'Stable' to 'Negative'.

The reason for the downgrade in outlook is that, despite an improvement in operating revenue, JoongAng Ilbo is facing increasing financial costs due to a rise in borrowings. NICE Investors Service stated, "Due to increased borrowings stemming from funding needs within affiliates and rising market interest rates, interest expenses rose from 4.7 billion won in 2022 to 15.9 billion won last year. As a result, the EBITDA-to-financial cost indicator declined from 2.4 times to 1.6 times during the same period, and despite the improvement in operating profitability, the ability to cover financial costs has weakened."

Additionally, the agency forecast that it will take a considerable amount of time for JoongAng Ilbo's financial structure to show meaningful improvement, given the ongoing burden of providing financial support to affiliates and reduced ability to secure alternative funding. JoongAng Ilbo has consistently incurred affiliate-related funding needs, such as a 30 billion won investment in JoongAng Ilbo M&P in 2021, a 13 billion won investment in Phoenix Sports and a 12 billion won investment in Dillybox JoongAng in 2024, a 45 billion won loan to JoongAng Holdings, and a 53.8 billion won acquisition of Town Board JoongAng last year. As a result, total borrowings surged from 119.1 billion won at the end of 2022 to 288.7 billion won at the end of last year. In addition, the scale of payment guarantees for affiliates has continued to expand, including 40 billion won for JTBC in 2023 and 30 billion won for Contentree JoongAng in 2024. Accordingly, NICE Investors Service analyzed that as of the end of last year, JoongAng Ilbo's debt ratio was 312.9%, and its net borrowing dependency ratio was 52.0%, indicating a weak level of financial stability.

NICE Investors Service also stated, "While JoongAng Holdings is assessed to have a certain level of financial flexibility, considering its past record of support and the collateral capacity of its real estate holdings, it is a burden that JoongAng Ilbo's ability to secure alternative funding has weakened compared to the past due to the sale of its headquarters building and investment stakes since 2010."

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