Korean convertible and exchangeable bonds

Updated 2026-10-31

Smaller Korean listed companies, especially on KOSDAQ, raise a large share of their funding through bonds that can turn into shares. Three types appear on DART, each with its own major event report.

CBs and BWs create new shares and dilute holders. An EB exchanges shares the company already owns, so it does not raise the share count of the issuer if the shares are of another company. Under the Commercial Act amendment that took effect in March 2026, a company can no longer use its own treasury shares as the asset behind an exchangeable bond; see the treasury shares guide.

The main terms in the filing

• Face value (사채의 권면총액): the amount raised.
• Coupon and yield to maturity (표면이자율, 만기이자율): many KOSDAQ CBs pay 0% to 2% interest but promise a higher yield if held to maturity.
• Conversion price (전환가액): the price per share at which the bond converts. It is based on recent market prices around the board decision.
• Conversion period (전환청구기간): for privately placed bonds, conversion usually cannot start until one year after issue.
• Put option (조기상환청구권): the holder can ask for repayment before maturity, often from 12 or 18 months after issue and then every few months.
• Call option (매도청구권): the issuer, or a person it names, can buy part of the bonds back from holders at a set yield.

Refixing (리픽싱)

Most Korean CBs and BWs include a clause that lowers the conversion price when the share price falls. This is called refixing. Under the FSC's regulation on securities issuance and disclosure, the main rules are:

• A price cut because the market price fell is limited to 70% of the initial conversion price.
• Since December 2024, a company can go below 70% only by a special resolution of a shareholders' meeting for that specific issue. Earlier, a clause in the articles of incorporation was enough, and many companies used it.
• If the price was cut and the share price later rises, the conversion price must be raised again, but not above the initial price.
• After a rights offering, a stock dividend or a similar event, the price may be lowered only to the level that reflects the actual dilution from that event.

Worked example

A hypothetical company with 20,000,000 shares issues a ₩10B CB with a conversion price of ₩5,000.

• At ₩5,000 the bond converts into ₩10B ÷ ₩5,000 = 2,000,000 shares, which is 10% of the existing shares (9.1% of the enlarged total).
• The share price falls and the conversion price is refixed to the 70% floor of ₩3,500. The same bond now converts into ₩10B ÷ ₩3,500 = about 2,857,000 shares, or 14.3% of the existing shares.

Refixing can therefore raise the potential dilution by 40% without any new filing about the bond itself. The company files a separate notice of each conversion price adjustment (전환가액의 조정), and the number of shares that the bond could create changes with each one. This site measures dilution on the dilution page using the conversion price in the decision filing.

Call options and the largest shareholder

A call option often allows the company to buy back 20% to 50% of the bonds and pass that right to a named person, sometimes the largest shareholder. This lets that person buy shares cheaply if the stock rises. Since late 2021 the largest shareholder and related parties may not take a call option for more shares than their stake percentage at the time of issue. Since December 2024, the company must also disclose who receives the right to exercise the call option and whether that person paid a fair price for it.

Bonds bought back before maturity

When holders exercise their put option, the company repays and holds its own bonds. It can cancel them or sell them again. A resale works like a new issue and can bring new dilution. Since December 2024, a company that acquires its own CBs before maturity must file a major event report stating why and whether it plans to cancel or resell them.

What to look for

• Total outstanding convertible securities compared with shares outstanding. The quarterly report lists unconverted bonds.
• Put dates. A wave of put exercises can force a company with little cash to raise money urgently.
• Who the buyers are. Filings name the subscribers; many are small private funds whose own investors are not shown.
• The use of funds and whether earlier bonds are being refinanced.

Comparison with the US

US convertible notes issued by larger companies usually have a fixed conversion price, with adjustments only for events such as stock splits. Price-reset features exist in US small-cap financing but are less standard. US issuers report a material financing in an 8-K, while Korea has a dedicated report for every CB, BW or EB decision and for every conversion price adjustment.

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