South Korea: refixing survived, but only to a floor

A Korean listed company can issue a convertible bond whose conversion price refixes downward with the market, but not without limit. Under the Financial Services Commission's securities issuance and disclosure regulation the refixing floor is 70% of the initial conversion price, and since 1 December 2024 the only way below it is a shareholder special resolution taken for that specific issue.

Key takeaways

• 리픽싱 is permitted, and floored. A downward adjustment of a convertible bond's conversion price may not take it below 70% of the initial conversion price.
• The articles-of-incorporation route was deleted on 1 December 2024. A sub-70% refix used to be pre-authorised in the articles on a general ground; the exception is now per issue, on a shareholder special resolution.
• The ratchet runs both ways. A privately placed convertible bond's conversion price, once marked down, must be marked back up as the shares recover, capped at the initial price.
• Nothing here is a facility. Capital arrives as discrete, separately disclosed events, each with its own pricing base date.

리픽싱, and what December 2024 removed

Korea is one of the few markets to give the mechanic a name of its own. 리픽싱 is the downward adjustment of a convertible bond's conversion price when the shares fall, ordinary practice on KOSDAQ until a wave of abuse around 2021 made it a policy problem. The response was not to ban it.

The regulation on the issuance and public disclosure of securities floors the adjusted conversion price at 70% of the initial conversion price. Below that there was an escape: a company could write the authority into its articles of incorporation, citing a purpose as broad as fundraising, and refix as far as it liked. The Financial Services Commission deleted that route with effect from 1 December 2024. The exception now needs a shareholder special resolution for the particular issue — a vote taken with the terms in front of the meeting rather than a clause drafted years before.

A floor on the price, not a cap on the discount

The distinction matters when the instrument is modelled. Hong Kong constrains the initial price against a benchmark; Korea lets it be negotiated and then constrains how far it can travel. The economics sit in the gap between the strike agreed at signing and 70% of it, and that gap is finite and known on day one.

The upward ratchet closes the other half. Since the 2021 reforms a privately placed convertible bond's conversion price, once marked down, must be marked back up as the share price recovers, capped at the initial price. A refix is a temporary accommodation to a falling market, not a permanent repricing. And where the price is adjusted for a genuine dilution event such as a capital increase or a stock dividend, the downward adjustment may only reflect the dilution actually suffered.

Discrete events, not a drawdown line

Whether an investor can subscribe repeatedly on the issuer's demand, priced at each drawdown, gets a flatter answer. Korean equity issuance runs through the 제3자배정 유상증자, the third-party allotment paid-in capital increase, and through privately placed 전환사채 and 신주인수권부사채. Each is announced, priced off its own base date and disclosed as its own event.

The December 2024 package tightened that too: for a private convertible bond the conversion price is computed from the market price at the actual settlement date, closing the practice of deferring settlement until a convenient price appeared. The same package brought call-option holders and pre-maturity bond buy-back and resale plans into major-event disclosure. Both changes assume a discrete, dated transaction, which is precisely what a committed equity facility is not.

What the structure needs, and what Korea supplies

전매제한, the part most often missed

Shares delivered on conversion are ordinary listed shares and trade on the Korea Exchange. The restriction attaches earlier, to the bond. A privately placed convertible bond that could be broken up and passed on would be treated as a public offering needing a registration statement, so the 전매제한 regime intervenes: the securities are typically deposited with the Korea Securities Depository under a transfer restriction for a period. A provider that models an exit from the day of funding is modelling the wrong day. See what actually makes shares free trading, and Rule 144 where the issuer is also US registered.

What a Korean board should settle first

Three things decide whether an instrument is worth documenting here: whether the initial strike leaves usable distance above the 70% floor; whether a shareholder meeting for anything below it is realistically obtainable; and how long the bond is immobilised. Compare the same instrument in Japan, where the cap is on speed rather than depth, in Hong Kong, where the initial price is benchmarked, and in Taiwan, where the resale freeze closes the market. For the instrument see convertible notes for listed issuers, then check the eligibility test.

• All markets
• Dilution mechanics
• All instruments

Primary sources

• Financial Services Commission — amendment to the Regulation on Issuance, Public Disclosure, etc. of Securities
• National Law Information Center — Regulation on Issuance, Public Disclosure, etc. of Securities
• Financial Services Commission (English)
• Korea Exchange — KOSPI, KOSDAQ and KONEX

Financing a Korean issuer: frequently asked questions

How far can the conversion price of a Korean convertible bond fall?

To 70% of the initial conversion price, and no further, unless shareholders pass a special resolution for that specific issue. The floor sits in the Financial Services Commission's regulation on the issuance and public disclosure of securities. It is a floor on the adjusted price rather than a cap on the discount at issue, so the arithmetic an investor cares about is the distance between the initial strike and that floor.

What changed on 1 December 2024?

The route that let a company pre-authorise sub-70% refixing in its articles of incorporation was deleted. A general purpose recorded in the articles, such as fundraising or buying assets, used to be enough. The exception now has to be approved by shareholders for the particular issue, which moves the decision from a document drafted years earlier to a vote taken with the terms on the table.

Can a Korean issuer run a standby or committed equity facility?

There is no recognised Korean equivalent. Korean issuers raise through third-party allotment paid-in capital increases and through privately placed convertible bonds and bonds with warrants, and each is a discrete event with its own pricing base date and its own disclosure. A facility under which an investor subscribes repeatedly on the issuer's demand, priced at each drawdown, does not map onto that machinery.

Are shares from a Korean private placement free to trade on delivery?

The shares delivered on conversion are ordinary listed shares and trade on the Korea Exchange. The bond itself is the restricted item: privately placed convertible bonds and bonds with warrants fall under the resale-restriction regime, and are typically deposited with the Korea Securities Depository under a transfer restriction so the issue is not recharacterised as a public offering. Confirm the applicable period with Korean counsel.