Case of an Advisory Attorney's Assistance | Advice Provided on an Exchangeable Bond Acquisition Transaction

2026.06.02김국일

This is a case of a client who pursued the acquisition of exchangeable bonds through the advisory attorney's review of the transaction structure, contract negotiation, and regulatory response advice, and stably completed the transaction.

1. Client Who Requested the Assistance of an Advisory Attorney

Exchangeable bonds advisory attorney corporate legal affairs corporate legal attorney consultation investment advice

The client who came to the advisory attorney requested professional advice while reviewing the acquisition of exchangeable bonds with a complex structure in order to invest jointly with a foreign investor in a domestic company.

Background of the Client's Case

The client in this case was a special purpose company that was reviewing a plan to acquire exchangeable bonds in order to invest jointly with a foreign asset management firm in a domestic content company.

The client was seeking a structure that would not merely acquire an equity stake but would guarantee flexibility for the investor while also securing the company's financial stability, and it concluded that the issuance of exchangeable bonds was the optimal alternative.

However, because it was a complex structure that included the participation of a foreign investor, professional review was needed in the conclusion of the contract and in the regulatory response.

In this situation, the client came to the advisory attorney and requested assistance.

2. Exchangeable Bonds Explained by an Advisory Attorney

An exchangeable bond is a special type of bond that carries the right to be exchanged for shares of another company held by the issuing company.

It is a financial instrument that combines the stability of an ordinary bond with the potential return available from equity investment, and it offers the advantage of balancing investment and financing.

▶ Key Features of Exchangeable Bonds

① Grant of Exchange Right
After a certain period, the investor is given the right to exchange the bond for shares of another company held by the issuing company.

② Regular Interest Income
Because the instrument has the nature of a bond, the holder may receive regular interest until maturity.

③ Issuance at a Lower Interest Rate
Because the option to exchange for shares is provided, these bonds are generally issued at a lower interest rate than ordinary bonds.

④ Repayment at Maturity
If the exchange right is not exercised, the principal is repaid at maturity, so the investor can secure stability.

⑤ Predetermined Exchange Ratio
The ratio between the face value and the shares subject to exchange is set in advance, so the opportunity for return varies according to share price fluctuations at the time of exchange.

Points to Note

A special purpose company (SPC) participating in exchangeable bonds must, unlike an ordinary investor, also consider its asset management and investment recovery structure, and therefore should pay attention to the following matters.

▶ Confirming the Legality of the Board Resolution
It is essential to review whether the issuing company lawfully resolved to issue the exchangeable bonds at its board of directors.

▶ Checking the Clarity of the Exchange Terms
If the exchange price, the claim period, the interest terms, and similar matters are unclear, the risk of dispute increases, so they should be specifically reflected in the contract.

▶ Confirming the Actual Existence of the Shares Subject to Exchange
It is essential to confirm whether the issuing company actually holds the treasury shares or affiliate shares that are subject to exchange.

▶ Checking Internal Management Procedures
Because exchangeable bonds involve no change in capital, there is no registration obligation, but it is necessary to confirm whether internal management, such as the preparation and retention of the bond register, is being carried out properly.

▶ Reviewing the Investment Structure and Tax Implications
An SPC must consider both its financing structure and tax efficiency, so it should check whether the terms of the exchangeable bond issuance align with its long-term operating plan.

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3. Assistance Provided by the Advisory Attorney

Advisory attorney exchangeable bonds SPC investment structure design regulatory response legal risk review

The issues in this case were as follows.

ㆍ The capital nature of the exchangeable bonds and their effect on the governance structure
ㆍ Regulatory compliance arising from the participation of foreign investors
ㆍ Coordination of the possibility of conflicting investor rights

Based on these issues, the advisory attorney closely reviewed the transaction structure and the risks, supported the contract negotiations and the regulatory response, and oversaw the SPC design, focusing on investment stability and the protection of the client's interests.

Review of the Transaction Structure and Risks

Noting that an exchangeable bond may have the nature of capital rather than being a simple bond, the advisory attorney comprehensively reviewed the possibility of share dilution, changes in the governance structure, and conflicts in the exchange terms.

In addition, through legal and financial due diligence on the target company, the advisory attorney identified hidden liabilities, inter-affiliate transactions, and potential litigation risks, and established a stable investment structure.

Contract Negotiation and Regulatory Response

The advisory attorney prepared and reviewed key contracts, such as the exchangeable bond underwriting agreement, the agreement among investors, and the joint investment agreement, and systematically supported the regulatory procedures, including the foreign exchange transaction report and the business combination report to the Fair Trade Commission.

In particular, the advisory attorney specifically reflected the provisions on early redemption, voting rights, and dividend rights so that the investor's rights would not be impaired.

Design of the SPC and Investment Structure

Considering a structure in which the client would participate jointly with an overseas asset management firm, the advisory attorney supported the establishment of the SPC and the design of the fund structure.

By establishing a structure that secured tax efficiency and clarified the rights and obligations among the stakeholders, the advisory attorney enhanced investment stability.

4. Results of the Advisory Attorney's Assistance

With the support of the advisory attorney, the client completed the acquisition of the exchangeable bonds and established strategic cooperation with the foreign investor on a stable basis.

In addition, the contract terms and the regulatory response were systematically managed, so that uncertainty was minimized even after the transaction.

Through this, the client established a basis for flexibly designing its recovery of investment funds and its future capital management strategy.

If You Need Advice

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Exchangeable bond transactions are complex in structure, and where foreign investors participate, regulatory compliance and the coordination of contract terms become key tasks.

Accordingly, in order to minimize potential risks and proceed with the transaction in a stable manner, it is advisable to make use of professional advice.

Drawing on the experience accumulated in various capital markets transactions, including exchangeable bonds, our firm assists in closely analyzing the legal issues anticipated in advance and in coordinating complex interests.

In cooperation structures with foreign investors and in investment methods that use an SPC or a fund as well, we provide comprehensive support, from the regulatory response to the structure design, based on accumulated expertise.

If you are in a situation where advice is needed in a transaction involving multiple interrelated factors, such as the acquisition of exchangeable bonds, 🔗Legal Consultation Booking is available to request assistance.

This content is based on actual cases handled by Daeryun Law LLC and has been partially adapted. All copyrights belong to Daeryun Law LLC.
Unauthorized reproduction, copying or distribution may result in legal action under applicable laws.