Taekwang Industrial Co. is expected to move ahead with its business restructuring plan by issuing exchangeable bonds (EBs) backed by treasury shares.

The company held a board meeting on Tuesday and designated Korea Investment & Securities Co. as the counterparty for the planned EB issuance backed by 271,769 treasury shares, effectively addressing disclosure concerns raised by the Financial Supervisory Service (FSS).

The move follows a previous board resolution at the end of last month approving a 318.6 billion won ($234.6 million) EB issuance based on its full 24.41 percent treasury stock holdings.

However, the FSS issued a correction order on Tuesday, citing the absence of specified bond recipients as a potential risk to shareholder interests—particularly those of second-largest shareholder Truston Asset Management Co., which had filed for an injunction a day earlier with the Seoul Central District Court to block the plan.

Under Korean capital markets law, listed companies must identify counterparties when disposing of treasury shares through board resolution. Omission of this information can lead to legal complications.

Treasury-share-based EB issuances are often viewed as functionally equivalent to third-party capital increases, which can dilute existing shareholder rights.

“While the government supports treasury share cancellation to enhance shareholder value, we believe securing investment capital and reorganizing our business is a more urgent priority,” said a Taekwang official. “The EB issuance is essential to maintain company operations and protect jobs.”

Truston, however, criticized the move as an attempt to exploit legal loopholes and bypass recent regulatory efforts promoting shareholder protection and mandatory treasury share cancellation.

Taekwang’s swift board action to confirm the EB issuance and designate a counterparty was seen as a direct response to the FSS’s order.

The company clarified in a regulatory filing that the bond issuance is aimed at funding new growth initiatives and long-term expansion.

The decision comes as Taekwang seeks to diversify its business amid sustained weakness in its core petrochemical segment, which posted a 27.2 billion won operating loss last year, marking its third consecutive year of losses.

The company aims to shift from manufacturing to broader sectors including distribution, services, and next-generation industries.

“The planned investment through next year will significantly exceed our available internal resources,” said a company official. “We need bold, all-in investment to drive corporate value through restructuring.”

Taekwang has already begun implementing its expansion strategy.

The group was recently named to the shortlist of potential buyers for a 63.38 percent stake in Aekyung Industrial Co., a key affiliate of Aekyung Group specializing in cosmetics and household goods.

It has also launched a dedicated investment arm, T2 Private Equity Co., to pursue merger and acquisition opportunities.

On Tuesday, Taekwang unveiled a new investment roadmap totaling 1.5 trillion won through 2025, including both acquisitions and new business formation. Roughly 1 trillion won is slated for investment this year alone.

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