The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Duk-Hoon Lee, "Korea Eximbank") announced on the afternoon of April 2 that it agreed to provide USD 300 million in ship financing to Scorpio Tankers Inc.―USD 175 million in direct loan and USD 125 million in ship bond guarantee.

Korea Eximbank Chairman Duk-Hoon Lee met with Scorpio Tankers COO Cameron Mackey at Scorpio Tankers' headquarters in New York City to sign the financial agreement.

The signing ceremony was attended by DNB Markets CEO Ted Jadick, J.P. Morgan Managing Director Michael Clare, A&O partner Paul Nelson and reporters from shipping news providers such as Marine Money and TradeWinds, reflecting local interest in Korea Eximbank's ship bond guarantee program.

The purpose of this financial agreement is for Korea Eximbank to finance Scorpio Tankers' purchase of product tanker vessels from three Korean shipbuilders* including Hyundai Mipo Dockyard.

* a total of 18 vessels from Hyundai Mipo Dockyard (10), Samho Heavy Industries (6), and Daewoo Shipbuilding & Marine Engineering (2)

Scorpio Tankers is a US-based owner/operator of product tankers leading the eco-ship boom in the maritime industry. It has ordered 57 high fuel-economy ships from Korean shipbuilders since last year.

A notable feature of the financial agreement is that it includes a USD 125 million ship bond guarantee, the first ever to be provided by an ECA (Export Credit Agency), alongside a USD 175 million direct loan.

A ship bond guarantee is an instrument by which Korea Eximbank guarantees the bond issued by a foreign shipowner to finance its purchase of Korean-made vessels.

The instrument allows shipowners to expand and diversify their funding sources by offering them easier access to capital markets.

Korea Eximbank had approved the bond guarantee in September last year and recently finalized the negotiations with Scorpio Tankers before finally signing the bond guarantee agreement on April 2.

As European commercial banks continue their retreat from marine finance since the global financial crisis, ECAs like Korea Eximbank are assuming an ever-increasing role in supporting ship exports.

Korea Eximbank had earlier approved another ship bond guarantee to a Korean shipping company*, and several foreign shipowners are currently seeking Korea Eximbank's financing through the ship bond guarantee as well.

* a USD 113 million ship bond guarantee to a domestic shipping company, Sinokor Petrochemical, to finance its ship purchase from Hyundai Mipo Dockyard (October, 2013)

In 2014, Korea Eximbank plans to provide USD 4 billion in ship financing―up 20% from last year―to domestic and foreign shipowners, especially for purchases of such high value-added vessels as eco-ships, drillships and LNG carriers.

Korea Eximbank will also continue to enlist the participation of Korean commercial banks, insurance companies, and pension funds in ship finance deals through use of such tools as bond guarantees and comprehensive guarantees.