This article was displayed on the ChosunBiz MoneyMove (MM) site at 1:28 p.m. on Mar. 31, 2026.
Dawonsys, a KOSDAQ-listed company facing delisting, applied for rehabilitation proceedings (formerly court receivership), putting convertible bond (CB) investors at risk of heavy losses. Dawonsys issued CBs worth 21.5 billion won in July last year, and investors are now all but certain to incur losses in less than a year.
According to investment banks (IB) and the Financial Supervisory Service's electronic disclosure system on the 31st, Dawonsys filed an application to commence rehabilitation proceedings with the Suwon Bankruptcy Court on the 30th. Dawonsys had planned to normalize the corporations by selling management control, but shifted course by applying for rehabilitation.
Dawonsys recently received a disclaimer of opinion from its auditor, triggering grounds for delisting. The reasons for the disclaimer were uncertainty about the continuity of the corporations due to excessive liability and a limitation on the scope of the audit. Last year, Dawonsys posted an operating loss of 108.1 billion won and a net loss of 192.4 billion won, and its current liabilities exceeded current assets by 697.5 billion won. In its current state, normalization of the corporations was deemed impossible.
The company pursued a sale to restore operations, but that too fell through. Dawonsys planned to sell the largest shareholder's equity to the Engineering & Construction Mutual Aid Association and to raise funds through a third-party paid-in capital increase, but withdrew the plan after applying for rehabilitation.
As the situation unfolded this way, not only existing shareholders of Dawonsys but also CB investors appear destined to face large losses. In July last year, Dawonsys issued CBs worth 21.5 billion won to secure operating funds and debt repayment funds. Investors included IGIS Asset Management, Korea Investment Value Asset Management, Renaissance Asset Management and Aone Asset Management.
At the time, the CB's coupon rate and yield to maturity were 0% and 1%, respectively, offering little in the way of interest revenue. The conversion price at issuance was 6,856 won, and the minimum refixed conversion price was 6,060 won. Considering Dawonsys shares were in the 8,000-won range then, investors likely invested with the intention of exercising conversion rights. However, investors failed to exercise the conversion rights in time and are expected to share the burden through measures such as debt-to-equity swaps during the rehabilitation plan process.
The problem is that even if Dawonsys' rehabilitation proceedings begin, normalization appears difficult given its current business structure. In its main railcar business, Dawonsys has been found to have delivery delays, prompting a government-level response.
Dawonsys signed a contract with KORAIL to deliver ITX-Maum trains, but it was revealed at last year's National Assembly audit that delivery had not been made for 218 of the 358 cars that were to be delivered by 2023. Although three contracts totaling 914.9 billion won were signed and advance payments were made, the contracts remained unfulfilled for more than two years past the delivery deadline. With the use of advance payments also unclear, the Ministry of Land, Infrastructure and Transport referred Dawonsys for investigation.
President Lee Jae-myung publicly pointed out these issues during the Ministry of Land, Infrastructure and Transport (MOLIT) year-end briefing last year. Lee said, "They took the order but didn't manufacture, and are using the advance payments to build a headquarters, aren't they?" and rebuked, "A government agency has been scammed."
The KORAIL delivery delays are affecting other businesses as well. POSCO E&C is said to have issued a notice terminating its 118.3 billion won contract signed in 2019 with Dawonsys to supply electric multiple units for the Sinansan Line double-track railway.
An industry official said, "With the financial risk of capital impairment and business difficulties, the chances of rehabilitation do not look high," adding, "A sale is essential for rehabilitation, but it is doubtful whether a bidder other than the Engineering & Construction Mutual Aid Association will emerge."