FTC takes action against CJ

[Anchor]

The Fair Trade Commission has initiated sanctions against CJ and CJ CGV for allegedly supporting insolvent affiliates in violation of the law.

Large corporate affiliates are prohibited from guaranteeing each other's debts, and this is seen as a violation.

This report was exclusively covered by reporter Lee Do-yoon.

[Report]

CJ Foodville, a food service affiliate of CJ, fell into a state of complete capital erosion in 2014.

The following year, it issued convertible bonds worth 50 billion won and embarked on aggressive investments.

However, its credit rating was far too low to secure funding.

[Credit rating agency official/voice altered: "If it's capital erosion, you can never get a good rating. The rating is too low for investors to come in. They would have to guarantee it or something like that."]

Despite this, CJ Foodville successfully raised a large amount of capital, which the Fair Trade Commission believes was due to illegal support from its parent company.

The method used was a 'TRS contract'.

CJ entered into a contract with a large securities firm, allowing the firm to purchase Foodville's convertible bonds and later repay them.

In effect, CJ guaranteed the transaction between the securities firm and Foodville.

This can be seen as a violation of the Fair Trade Act, which prohibits debt guarantees between large corporate affiliates.

Similarly, CJ Construction and Simuline, which were also facing financial difficulties, received support from CJ and CJ CGV to sell convertible bonds.

The confirmed amount alone is 115 billion won.

The Fair Trade Commission has begun sanctions against CJ and CGV, viewing their actions as effectively providing a disguised guarantee to insolvent affiliates.

CJ has countered that the TRS contract is a legal financial product under the supervision of the Financial Supervisory Service and that there have been no precedents for sanctions due to unfair support.

This is KBS News, Lee Do-yoon.