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[Alpha Biz= Kim Jisun] Domestic securities firms that initially subscribed to AK Holdings' 1.3 trillion won exchangeable bond (EB) have sold off all their holdings, according to the investment banking (IB) industry. 

 

Currently, institutional investors, including asset management firms, who acquired these EBs have begun demanding the repayment of the principal, invoking their put options (the right to sell the bonds) since the second half of last year. There is growing concern that these investors could demand the full repayment of both principal and interest by the upcoming put option deadline in March.

According to sources on Tuesday, three securities firms—Daishin Securities (800 billion won), Meritz Securities (350 billion won), and Korea Investment & Securities (180 billion won)—had fully sold off the EBs by the end of 2022, after initially subscribing to AK Holdings' third series of EBs.

The third series of AK Holdings' EBs, issued in September 2022, are bonds that could be converted into Jeju Air shares at an exchange price of 15,050 KRW per share. However, Jeju Air’s stock price has not exceeded the conversion price since the issuance of the EBs, and it has continued to decline recently. As a result, bondholders have been unable to convert their bonds into stock. Additionally, as put option deadlines arrived in September and December of last year, bondholders claimed repayment of the principal and interest on EBs worth 46.3 billion KRW.

With the next put option date approaching in March, concerns are rising in the market that the bondholders may seek to recover the full amount of their investments, including the remaining principal and interest.

 

 

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