KSD Services >
Securities Deposit and Settlement Services >
Rights Management of Deposited Bonds
Rights Management of Deposited Bonds
KSD processes the receipt and payment of principal and interest, exercise of rights of equity-linked bonds and payment of principal and interest of untransferred (or unclaimed) bonds.
Receipt and payment of principal and interest
Receipt and payment of principal and interest : Confirmation of details for payment of principal and interest (D-2), Request for payment of principal and interest (D-1), Receipt and payment of principal and interest (D-Day)
|Confirmation of details for payment of principal and interest (D-2)
- KSD finalizes the payment statement specifying the amount of principal and interest on the bonds deposited in the participants' proprietary and investor accounts two business days before the payment day in order to ensure the accurate calculation and receipt of principal and interest payments.
|Request for payment of principal and interest (D-1)
- KSD requests the payment of principal and interest to the issuer, through the check clearing system of the Korean Financial Telecommunications & Clearings Institute (KFTC), one business day before the payment day.
|Receipt and payment of principal and interest (D-Day)
- KSD receives the principal and interest from the issuer and distributes them to participants on the payment day. The participants then distribute the payment to investors. (Withholding tax on interest income is collected by KSD for proprietary positions, and by participants for their investor clients.)
- In the event the issuer defaults on principal and interest payments due to bankruptcy or any other reason; in case of guaranteed bonds, KSD receives the principal and interest from a third-party guarantor and pays them on the on the payment day, and in case of non-guaranteed bonds, the bondholder needs to withdraw the bond through the participant and request payment directly from the issuer one day after the payment day (D+1).
Exercise of rights of equity-linked bonds
Investors seeking to exercise their rights on deposited equity-linked bonds should make such request to their broker (participant) within the period designated by the issuer.
Exercise of rights of equity-linked bonds : Convertible bond, Bond with warrants, Exchangeable bond
||Bond with warrants
- When a participant (investor) submits an application for the exercise of rights, the volume of convertible bonds in the account book is reduced, and the number of shares is increased.
- Trading of shares acquired through conversion is possible from the listing date of the new shares.
- The method of exercising the warrant and the period the new shares of stock may be traded are similar to that of convertible bonds.
- The exercise price for the new shares can be paid in cash or substituted with bonds of equivalent value.
- Issuers deposit securities needed for exchange to ensure the exercise of exchange right and protect bondholders until the application deadline.
- When there is a request for exchange, KSD distributes the corresponding stocks to the participant.
Rights exercise of untransferred/unclaimed bonds
- Untransferred or unclaimed bonds are bonds which title has not been transferred by the time of principal and interest payment, after the investor withdrew the bond registration receipt in the name of KSD from the participant. In this case, investors can claim the payment from KSD.
- After withdrawing bond registration receipts, investors should transfer the title to their own name or put the registration receipts back in deposit at KSD through participants before the principal and interest payment date. Once the payment period has expired, investors are unable to receive principle and interest. Therefore, investors should request the exercise of their rights within the period.