Abstract

Purpose: This study examines the role of perpetual convertible bonds (CBs) as restructuring instruments in Korea’s logistics and shipping industry. It specifically focuses on the dilution of shareholder value upon CB conversion into equity and the resulting conflicts between creditors and existing shareholders. Despite these risks, perpetual CBs are frequently used to stabilize distressed firms, especially through state-owned financial institutions. Research Design, Data, and Methodology: A qualitative case study method analyzes the case of HMM. The analysis draws upon academic literature, analyst reports, public disclosures, and financial news. The study investigates how the issuance and conversion of perpetual CBs affected HMM’s corporate governance, market valuation, and investor sentiment. Results: The findings reveal that while CBs offer short-term liquidity and balance sheet improvement, their conversion leads to substantial equity dilution and loss of value for minority shareholders. HMM’s case highlights how ambiguous dividend policies, excessive cash reserves, and concentrated public ownership contribute to continued undervaluation. Unresolved CB obligations further hinder attempts at privatization. Conclusion: The study recommends policy reforms to strengthen disclosure standards, enhance governance transparency, and protect shareholder rights. These measures are critical for improving the effectiveness and sustainability of mezzanine financing in corporate restructuring practices.