This article was published on Sept. 4, 2025, at 6:13 a.m. on the ChosunBiz MoneyMove site.
The announcement of corporations issuing exchangeable bonds (EB) based on their own stocks is pouring in almost daily. In the market, there are even comments saying, "It's now too much to even pay attention." With a revision of the Commercial Code that mandates the retirement of treasury stocks being pushed forward, there is a surge in demand to issue EBs to secure funds before that.
Due to the EB issuance craze, mezzanine-focused hedge fund management companies have seen a significant increase in opportunities. Some managers are even forming funds that specialize solely in EB issuance.
According to the investment banking (IB) industry on the 4th, 42 listed companies have announced the issuance of EBs that use their own stocks as the exchange target over the past six months.
Along with securities firms, hedge fund management companies are mainly stepping up as underwriters for EBs. A particularly notable name is Orion Asset Management. Over the past six months, Orion Asset Management participated in the EB issuances of six companies: Peptron (totaling 24.2 billion won), ESTsoft (totaling 6 billion won), MONA YONGPYONG (totaling 4.6 billion won), Sugentech (totaling 12.5 billion won), GnC Energy (totaling 10 billion won), and DongKoo Bio&Pharma (totaling 8.6 billion won).
Other management companies are also continuing to participate. Pharos Asset Management is involved with ESTsoft; NH Hedge Asset Management is with Inveni, Peptron, and DongKoo Bio&Pharma; Renaissance Asset Management is with MK Electron; Infinity Investment Advisory is with AJU IB INVESTMENT; and Tiger Asset Management is involved with Peptron and DongKoo Bio&Pharma. Notably, NH Hedge Asset Management is even creating a blind fund that specializes solely in EB investments, showcasing an aggressive approach.
Generally, EBs are set with a coupon and maturity interest rate of 0%, commonly referred to as 'zero-coupon bonds.' The exchange value is often set with a premium of more than 15-20% compared to the current stock price, and there are not a few cases where there is no down-refixing clause. If the stock price rises after issuance, capital gains can be realized through the exchange rights.
Despite being generally advantageous for the issuing companies, hedge fund managers are instead using this structure as an investment opportunity. When stock prices rise, they can quickly earn substantial revenue through exchanges, and depending on the situation, they can also implement strategies to reduce risk by managing other products in line with market conditions. Moreover, in most cases, there is a safety mechanism known as a put option to prevent losses.
However, since most corporations are rushing to complete the EB issuance procedures before the amendment of the Commercial Code, there are concerns that investments are being made without proper verification of the corporations' financial status.