With five JoongAng Group companies entering rehabilitation proceedings, an analysis has emerged that Hanyang Securities faces a heavy exposure burden relative to its total assets. The exposure related to JoongAng Ilbo affiliates held by Hanyang Securities is estimated at approximately 84 billion won. However, since it is managed through a trust structure, both NICE Investors Service and Hanyang Securities view the likelihood of this exposure turning into a loss as low.
NICE Investors Service released a report titled "Review of Exposure to JoongAng Ilbo Affiliates by Financial Sector" on Monday, analyzing that Hanyang Securities' risk exposure is relatively large. The firm holds bonds from JTBC (54 billion won) and JoongAng Ilbo (30 billion won), exceeding 12% of Hanyang Securities' equity capital (647.8 billion won) as of the end of March this year. According to NICE Investors Service, Hanyang Securities is the only financial firm whose exposure to an individual company exceeds 0.5% of total assets and 2% of capital.
In particular, NICE Investors Service's view is that JTBC's application to begin rehabilitation proceedings is expected to lead to deteriorating soundness and an expanded burden of provisioning. In the report, NICE said, "The JTBC-related exposure consists of 10.8 billion won related to the special purpose company (SPC) 'HY Athena 2' and 36 billion won in commercial paper, and this exposure is classified for accounting purposes as financial instruments at fair value through profit or loss (FVPL), making it an asset subject to soundness classification."
However, because the JTBC and JoongAng Ilbo bonds held by Hanyang Securities are secured by collateral, the likelihood of them turning into losses is assessed as low. The exposure is managed through a trust structure, and Hanyang Securities is also said to have secured the counterparty's consent for transfer of collateral. A Hanyang Securities official said, "Because the collateral assets are managed in the form of a trust, internally we view the likelihood of this developing into a problem as low."
