KKR accepts no-refixing terms, six-year lock-up; proceeds to fund AI infrastructure, overseas M&A
Samsung SDS, the IT services arm of South Korea’s Samsung Group, said Wednesday it will issue 1.22 trillion won ($829 million) in convertible bonds to global investment firm KKR, bringing in the active minority investor to bankroll its push into artificial intelligence infrastructure and overseas acquisitions.
What makes the deal unusual is its structure.
According to a regulatory filing, the bonds mature in April 2032 and carry a fixed conversion price of 180,000 won per share, an 18 percent premium to Tuesday’s closing price. KKR accepted the terms with no refixing clause, a provision common in Korean convertible bond deals that lowers the conversion price if the stock drops, giving investors more shares for their money.
There are no early-exit options for either side, and both the bonds and any converted shares are locked up for six years. KKR has committed to staying in with no safety net if the stock underperforms.
Should KKR convert the bonds into equity, it would hold roughly 8 percent of Samsung SDS, making it the fourth-largest shareholder behind Samsung Electronics at 22.6 percent, Samsung C&T at 17.1 percent and Samsung Group Chairman Lee Jae-yong at 9.2 percent.
The deal was months in preparation. At its annual shareholders meeting on March 18, Samsung SDS raised its convertible bond issuance ceiling from 67 billion won to 1.5 trillion won, without which Wednesday’s transaction would not have been legally possible. CEO Lee June-hee told shareholders at the time that 2026 would be pivotal for AI and the cloud, and that growth investment and acquisitions would take priority.
As Samsung SDS holds 6.4 trillion won in cash, the KKR proceeds bring its total investment capacity to 7.6 trillion won. Two AI data center projects are in the pipeline: a national AI computing center in the southern coastal county of Haenam, South Jeolla Province, targeted for 2028, and a facility in the southeastern city of Gumi, North Gyeongsang Province, due a year later. The company is also entering the business of designing, building and operating data centers for outside clients.
Beyond capital, KKR will serve as a strategic adviser for six years on cross-border M&A. That role fills a gap Samsung SDS has acknowledged: despite ample cash, it has been cautious about large overseas acquisitions and lacks the deal-making infrastructure KKR brings.
Samsung SDS has been building its AI credentials separately.
It signed a broad partnership with OpenAI in October 2025 and by December became the first Korean company to secure a ChatGPT Enterprise reseller deal, landing clients in sectors from food service to travel.
“We will tap KKR’s global capital markets expertise to actively pursue M&A and other growth opportunities,” CEO Lee said.
The transaction is expected to close in the second quarter. Samsung SDS shares surged 20 percent in Wednesday morning trading.
mjh@heraldcorp.com