CJ CGV is once again issuing bonds. The scale is 1 trillion won. Concerns have been raised about the need for caution in investment as the subscription rate for hybrid capital securities previously issued at 400 billion won was low, and the financial situation is not good.
However, the investment industry noted that "considering the movie industry is entering a recovery phase and that it is approaching the summer peak season, there is still sufficient investment demand."
According to the Financial Supervisory Service's electronic disclosure system on the 13th, CJ CGV will open subscriptions for 500 billion won in 1.5-year unsecured bonds and 500 billion won in 2-year unsecured bonds, totaling 1 trillion won, on the 21st. The desired public offering interest rates are 4.85% to 5.45% for the 1.5-year bonds and 5% to 5.6% for the 2-year bonds.
CGV plans to use these funds for debt repayment. In August, CGV must repay 500 billion won in commercial paper to both Korea Investment & Securities and DAISHIN SECURITIES, which will be settled through bond issuance.
This is not the first time CGV has issued bonds. In May, CGV announced that it would pay 400 billion won to Walt Disney Company Korea through the issuance of hybrid capital securities. The distribution fund is the fee that theaters pay to distributors.
Previously, CGV raised 1.2 trillion won in hybrid capital securities in 2024, 2 trillion won in general public corporate bonds in 2023, and 4 trillion won in subordinated convertible bonds in 2022.
However, as the bonds CGV previously issued showed consistently low sales rates, analyses suggest that the upcoming 1 trillion won bond subscription may not be easy either.
Notably, just 100 billion won of the 400 billion won hybrid capital securities issued by CGV in May was sold to institutional investors, with the remaining 300 billion won being taken on by the underwriter, KB Securities. Other bonds also showed low sales rates, with most selling at less than half the expected amount as investors deemed the revenue insufficient compared to the risks.
There are also concerns about CGV's financial state being unsatisfactory, resulting in high risk levels. As of the first quarter of 2025, CGV's liabilities totaled 33.835 trillion won, which is six times its capital of 5.437 trillion won. Due to the nature of the film industry, theater rents are accounted as lease liabilities, leading to higher liabilities compared to other sectors. Even excluding CGV's lease liabilities of 10.579 trillion won, total liabilities still approached 20 trillion won, resulting in a debt ratio of approximately 400%, which is double the often regarded stable level of 200%.
The liquidity indicators are not looking good either. Typically, a liquidity ratio approaching 150% is necessary for a corporation to be considered sound. CGV's liquidity ratio dropped from 72.4% in 2020 to 63.6% in 2021, and it has continued to decline, reaching 42% by the end of the first quarter of 2025.
The interest coverage ratio, which indicates whether operating profit can cover interest payments, is also low at 0.18 in the first quarter of this year. The interest costs were nearly six times higher than the operating profit generated. CGV has borrowed over 1 trillion won from banks to continue operations since it fully suspended business due to COVID-19 in 2020, resulting in a heavy interest burden.
Experts believe that having 10 underwriters for the bond is also a reason the subscription may be difficult. For this bond issuance, 1.5-year bonds will have KB Securities, Korea Investment & Securities, Shinhan Investment Corp., Samsung Securities, and Kiwoom Securities as underwriters, while NH Investment & Securities, Mirae Asset Securities, DAISHIN SECURITIES, Hanwha Investment & Securities, and BNK Investment & Securities will participate in the 2-year bond underwriting. They aggregate the underwriting of the market.
Professor Kim Beom-jun from The Catholic University of Korea stated, "It is rare to appoint 10 underwriters for relatively small-scale bonds in the 1 trillion won range, and if they fail to subscribe in the market, the underwriters will have to take on the remaining bonds, leading to many underwriters coming together."
On the other hand, the investment industry sees value in investment, considering the recovery trend in the film industry. According to the Korean Film Council, the number of moviegoers is showing a recovery flow with 112.81 million in 2022, 125.14 million in 2023, and 123.13 million in 2024.
Moreover, with the government distributing movie discount coupons in the second half of this year and highly anticipated films like "The All-Knowing Reader's Perspective" and "Zombie Daughter" releasing in time for the summer peak season, there are expectations that performance will improve starting in the second half of the year.
A source in the investment industry stated, "Considering the financial statements, corporate growth potential, and support from parent companies, it appears that the bond rating is A- (investable). Customers who find the interest rates acceptable compared to the risks are likely to subscribe."