This article was published on July 11, 2025, at 10:25 p.m. on the ChosunBiz MoneyMove site.
Korea's first-generation online video service (OTT) platform Watcha is in danger of going through corporate restructuring. This comes as Inlight Ventures, one of the investors, has requested court administration. Due to prolonged deficits, it has become difficult for the investor to recover the invested funds, prompting the creditor to directly request the restructuring process.
Watcha plans to request the withdrawal of corporate restructuring through negotiations with investors. However, the situation is challenging. Legally, the side holding the 'flowering card' is the creditor.
According to the investment banking (IB) industry and legal circles on the 14th, the Seoul Bankruptcy Court is currently reviewing the corporate restructuring application for Watcha submitted by Inlight Ventures.
The court plans to hold a hearing on the 22nd to hear the applicant's opinion. According to the Debtor Rehabilitation Act, corporate restructuring can be applied for solely by creditors holding more than 10% of the corporation's equity.
It is rare for investors to apply for corporate restructuring for their portfolio companies. However, Inlight Ventures appears to have taken this strong measure because it judged that the current management condition of Watcha makes it difficult to recover its investment.
In fact, Watcha has not escaped a long-term operational deficit, falling into a complete capital erosion state. As of the end of last year, the total capital was minus (-) 79.6 billion won. The external auditor also notified that it would decline the audit opinion due to uncertainty about the assumption of going concern (that the corporation will continue normal operations). This situation can be interpreted as one of the requirements for court administration, i.e., 'insolvency.'
With the possibility of Watcha's corporate restructuring increasing, the stance of investors is mixed. First, shareholders holding equity are bound to be reluctant to support restructuring. Once the restructuring process begins, shares are often diluted or entirely canceled for free, and when attracting new investors, the equity is diluted through paid capital increases.
On the other hand, investors holding debt instruments like convertible bonds (CB) see enforcing the corporate restructuring procedure as a way to secure negotiation power, even at the expense of suffering losses. Once in the restructuring process, the court will adjust based on the creditors, facilitated by the company's reorganization process, allowing creditors to negotiate directly about repayment methods or schedules.
Particularly for Watcha, more than half of the liabilities have originated from investment in convertible bonds, and as a platform company with almost no substantial collaterals such as real estate, the influence of creditors can only increase once restructuring begins. For the restructuring plan to pass, more than three-quarters of secured creditors and two-thirds of general creditors must agree. However, since Watcha essentially has no secured creditors, the opinions of general creditors will carry absolute weight.
Watcha began its investment attraction journey in 2012 when it received investment from Kakao Ventures (formerly known as K Cube Ventures), raising a total of 55 billion won in the form of redeemable convertible preferred stocks (RCPS). These RCPS have now been fully converted into common stocks, with major shareholders including Atinum Investment (7.63%), Company K Partners (5.14%), Kakao (3.86%), and Korea Development Bank (3.38%).
Subsequently, Watcha changed its investment attraction method from RCPS to CB in 2021, raising funds through issuing CBs totaling 49 billion won. At that time, Inlight Ventures and Dunamu were among those who invested through CBs. They are now listed as creditors.
Industry insiders believe that Watcha already meets the requirements for starting the corporate restructuring process under the Debtor Rehabilitation Act, as it is in a complete capital erosion state and in an 'insolvency' condition.
If the court decides to initiate the corporate restructuring process in the future, Watcha is expected to pursue mergers and acquisitions (M&A) before the restructuring plan is approved. This will involve issuing new shares through a third-party placement capital increase, funneling investor funds into the company to repay debts. Existing shareholders' stakes will be canceled for free, allowing new investors to become the majority shareholders. However, as the management situation deteriorates and court administration is undergone, there is a high likelihood that some restructuring claims will be converted into equity.