CJ CGV, South Korea’s largest multiplex cinema chain, plans to increase its capital base by 200 billion won ($184 million) by selling 20% of a new shares issue to Keistone Partners, industry sources said on Thursday (December 3).
Given the difficult financial status of CJ Corporation, the holding company of CJ CGV, the capital increase is likely to be conducted through a third party allocation. The cinema chain has been valued at 1 trillion won.
The debt ratio of CJ CGV, which was 1118.3% at the end of September on a consolidated basis, was lowered to an early 700% range after the injection of about 200 billion won. It had total debts of 3.99 trillion won at the end of September, and total equities of 356.9 billion won.
CJ CGV, which has been actively raising funds from outside, has 180 billion won worth of bonds and borrowings that will mature in less than one year. It also paid 5.7 billion won as termination benefits in September, a figure which is likely to grow as more movie theaters close down due to the Covid-19 pandemic.
The company’s financing costs are also increasing every year, with an outlay of 157 billion won in 2019 and approximately 118 billion won in the first nine months of this year.
Despite its efforts to increase liquidity, CJ CGV’s performance and financial statement have worsened due to the prolonged pandemic. The company sold a 25% stake in CJ Vietnam Company in July and secured 32.4 billion won.
It held a rights offering worth 220 billion won in August and issued hybrid bonds worth 80 billion won in October. The cinema chain plans to issue 200 billion won worth of corporate bonds with a three-year maturity on Friday (December 11).
CJ CGV is expected to remain under financial pressure for the time being as it has to pay 350 billion won when a total return swap with Turkey’s MARS Entertainment matures in the first half of next year. It appears likely to repay the amount by raising 200 billion won from new financial investors and using cash and cash equivalents from the existing company. (Reporting by Ar-rum Rho)