Foreigners have sharply reduced their holdings of exchangeable bonds issued by the financially troubled Hyundai Merchant Marine Co. to avoid bigger losses, industry sources said Friday.

In the past four months, a large number of foreigners have exchanged their bonds issued by Hyundai Merchant into KB Financial Group stock.   

Consequently, the outstanding value of the company's EBs fell to less than 50 billion won ($44 million) recently from 100 billion won at the end of December, people familiar with the matter said. 

"Amid speculation that Hyundai Merchant may go into court receivership despite its self-help efforts, investors appear to have taken a move in advance to minimize their investment losses," an official at the Korea Financial Investment Association said.

The share price of Hyundai Merchant, the country's second-biggest container carrier by sales after Hanjin Shipping Co., had fallen by more than half to 2,000 won as of Thursday. The company shifted to a net loss of 626.99 billion won last year from a net profit of 21.76 billion won a year earlier.

In May 2013, the company issued 130 billion won worth of EBs in overseas markets. The EBs carry a maturity date of May 9, 2018, and investors have had the right to change the bonds into KB common stock since June 9, 2013. (Yonhap)