The Export-Import Bank of Korea (www.koreaexim.go.kr, Kim Yong-hwan, “Korea Eximbank”) announced on February 3 that it will provide USD 353 million in ship financing (a USD 230 million Direct Loan* and a USD 150 million Comprehensive Guarantee**) to Greek shipowner Oceanus, which ordered four LNG ships from Korean shipbuilders.
*Direct Loan: long-term loan provided by Korea Eximbank to foreign buyers to finance their purchase of Korean ships.
**Comprehensive Guarantee: financial instrument designed to get commercial banks to participate in lending to a foreign ship buyer by guaranteeing the buyer’s repayment.
The USD 150 million Comprehensive Guarantee, in particular, was provided as a means to involve Korea Exchange Bank and international commercial banks in the global ship financing deal.
Korea Exchange Bank had already made ship finance loans backed by Korea Eximbank’s Comprehensive Guarantee, providing USD 70 million to Chile’s CSAV in August, USD 130 million to Canada’s Teekay in November, and USD 100 million to Sweden’s Stena and is well on its way to establishing itself as a global ship financier.
Oceanus is an affiliate of Economou*, one of the two biggest maritime shipping groups in Greece.
* Greek maritime shipping group which owns several shipping companies including the general shipping company DryShips, Cardiff Marine (operator of bulk ships and oil tankers), and Ocean Rig (drilling ships).
Lately Oceanus has been actively seeking entry into the LNG carrier market using its network with major energy companies established in its existing lines of business such as bulk carriers, oil tankers, and drill ships.
To that end, Oceanus signed an agreement to purchase four fuel-efficient, eco-friendly LNG carriers* (USD 880 million) from Daewoo Shipbuilding & Marine Engineering in July 2011.
* Fuel-efficient, eco-friendly LNG carriers (Tri-Fuel Diesel Electric Propulsion Ships) can save about 30% more fuel compared to existing LNG carriers (Steam Turbine Propulsion Ships).
A Korea Eximbank official explained that the bank “persuaded Oceanus to put up the vessels to be purchased as collateral and to open an earning account* in order to mitigate its risk of defaulting on our ship financing, which amounts to 60% of the shipowner’s total liability to creditors.”
* Earning account: an account required by the lender, in which the borrower accumulates a portion of income generated from chartering ships as a way of bolstering the debtor’s solvency.
Prior to this transaction, Korea Eximbank had provided USD 264 million in ship financing to Norwegian shipping company Songa, which had signed an agreement to purchase two drilling ships from Daewoo Shipbuilding & Marine Engineering on January 24.
Songa is an offshore drilling company founded in 2005 which drills for oil in the Norwegian part of the North Sea.
A Korea Eximbank official characterized the financing of the drill ship purchase as “a brilliant success achieved through co-financing between senior creditors such as Korea Eximbank and GIEK and junior creditors including domestic institutional investors,” adding that the bank “will direct all our energy to facilitating ship exports by involving domestic institutional investors with abundant liquidity in our ship financing package which combines senior and junior loans.”
