[비즈한국] It has been confirmed that a multi-billion won collateral has been placed on the real estate assets of Hong Jung-in, a third-generation member of the JoongAng Group and CEO of ContentreeJoongAng036420 and Megabox JoongAng, for tax security purposes. As liquidity issues within the group intensify, with major affiliates such as ContentreeJoongAng and Megabox JoongAng filing for rehabilitation procedures and the JoongAng Ilbo's commercial paper defaulting, interest is focusing on the financial situation of the owner family's third generation.
Collateral Established by Tax Authorities in August 2024
According to Biz Hankook's investigation, tax authorities have placed a mortgage on the Hannam The Hill apartment in Hannam-dong, Yongsan-gu, Seoul, which is registered under the name of Hong Jung-in, CEO of ContentreeJoongAng and Megabox JoongAng. In August 2024, the Yongsan Tax Office established a collateral right on this property with a maximum debt amount of 6.73572 billion won. The cause for the registration is a 'tax payment security contract'.
A tax payment security contract refers to an agreement where personal assets are provided as collateral to pay high taxes over an extended period (installment payments). In the business world, it is not uncommon for tax security to be established during the process of installment payments for inheritance or gift taxes.
An official from the Yongsan Tax Office explained, "A tax payment security contract is a method where a taxpayer who has tax liabilities but faces difficulty paying immediately due to financial circumstances provides real estate or other assets as collateral to receive a deferral or extension of the payment deadline," adding, "If the tax amount is large, it is common to provide collateral and pay in installments over several years."
It is interpreted that CEO Hong also provided real estate as collateral to pay a large amount of national tax in installments over a certain period. Given that the maximum debt amount exceeds 6.7 billion won, it is presumed that the related tax amount is also significant. While there is speculation that he might be paying off gift taxes incurred during the succession process through installment payments, the specific tax item has not been confirmed.
If the agreed-upon tax payment schedule is not met, the tax authorities can execute the collateral right in accordance with relevant laws. In such a case, the real estate provided as collateral could be subject to seizure and public auction. JoongAng Holdings stated, "We are not aware of any personal tax matters."
The Hannam The Hill property provided as collateral was purchased by CEO Hong in November 2020 for 7.6 billion won and has a dedicated area of 233.224㎡ (approx. 71 pyeong). Hannam The Hill is considered one of Korea's premier luxury residential complexes. It is understood that similar units adjacent to CEO Hong's residence are currently listed for 20 billion won.
JoongAng Group Affiliates File for Rehabilitation, JoongAng Ilbo Commercial Paper Defaults
CEO Hong Jung-in is the grandson of the late JoongAng Group founder Hong Jin-ki and the second son of JoongAng Holdings Chairman Hong Seok-hyun. He is the second-largest shareholder, holding 37.2% of JoongAng Holdings, the holding company of JoongAng Group. Shares of JoongAng Holdings are held by the owner family, with Chairman Hong's eldest son, Vice Chairman Hong Jung-do, holding 55.8%, CEO Hong Jung-in holding 37.2%, and Chairman Hong Seok-hyun holding 7.0%. CEO Hong has led the group's content and theater businesses as the head of ContentreeJoongAng and Megabox JoongAng.
The JoongAng Group has recently faced a liquidity crisis as core affiliates filed for rehabilitation one after another. JTBC failed to repay 20.6 billion won in securitized loans on the 12th, and on the 14th, five companies—JTBC, ContentreeJoongAng, Megabox JoongAng, JoongAng Holdings, and JoongAng P&I—filed for the commencement of rehabilitation procedures with the Seoul Rehabilitation Court. On the 19th, 22 billion won worth of JoongAng Ilbo's commercial paper (CP) was officially declared in default.
On the 15th, JoongAng Group Vice Chairman Hong Jung-do held a press conference at the JoongAng Ilbo auditorium in Sangam-dong, Seoul, stating, "We did our best for management stability, but due to deteriorating external economic conditions and financial tightening caused by credit rating downgrades, among other reasons, we were left with no choice but to make this inevitable decision." He added, "We will exhaust all necessary means for rapid normalization and make painstaking efforts, including ensuring employment stability."
Concerns are rising in the market that the JoongAng Group's financial burden will be difficult to resolve in the short term. It is reported that the loans and corporate bonds reaching maturity this month alone are close to 300 billion won, and the amount of debt to be repaid within this year exceeds 600 billion won. While the JoongAng Group is pursuing the sale of its office building, the remaining balance of loans on the property is approximately 380 billion won, so it is expected that the actual cash secured from a sale would be limited to around 200 billion won.
Calls for accountability from the owner family are also intensifying. Investors who invested in JoongAng Group affiliates held a rally in front of the JTBC office building on the 19th, demanding that Chairman Hong Seok-hyun's family contribute their private assets and guarantee the return of principal. They stated, "The JoongAng Group has pushed the 790 billion won debt caused by reckless management onto ordinary people and hid behind the law," strongly demanding a 100% guarantee of individual creditors' principal and the contribution of private assets by the owner family.
JoongAng Holdings stated, "There is nothing specific currently being reviewed regarding the contribution of private assets by the owner family."