The Export-Import Bank of Korea (www.koreaexim.go.kr, Chairman Lee Duk-hoon, “Korea Eximbank”) announced on July 4 that the bank will provide USD 295 million in ship financing to Minsheng Financial Leasing (MSFL) of China, which ordered three 18,400 TEU (twenty-foot equivalent unit) container vessels from Daewoo Shipbuilding & Marine Engineering (DSME).

The deal is to be co-financed by the Export-Import Bank of China (China Eximbank), with the latter guaranteeing 50% of Korea Eximbank's loan to MSFL.

Korea Eximbank Chairman Lee Duk-hoon signed the financial agreement with China Eximbank Chairman Li Ruogu at the Presidential Blue House on July 3 in the presence of Korean President Park Geun-Hye and Chinese President Xi Jinping.

The successful ship financing to MSFL was owed, most directly, to the financial cooperation between the Korean and Chinese Exim banks that resulted in their sharing of project risk.

While MSFL was weighing the merits of awarding the contract to a Korean shipyard, the two export credit agencies moved swiftly to finalize their financial cooperation plan on this deal and expressed their intent to co-finance it, decisively tilting MSFL's calculus in favor of DSME.

This ship financing deal, above all, is the first tangible outcome to materialize from the Reciprocal Risk Participation Agreement (RRPA) concluded between the two Exim banks in June 2013 when President Park Geun-Hye made a state visit to China.

According to a Korea Eximbank official, “The conclusion of the RRPA in June 2013 served as a catalyst for this co-financing deal. Korea Eximbank will continue to expand its network with other export credit agencies around the world to support the sales diplomacy of the Park Geun-hye administration.”

The Reciprocal Risk Participation Agreement (RRPA) commits Korea Eximbank and China Eximbank to jointly provide loans or guarantees (including counter guarantees) to Korean and Chinese companies that jointly undertake export deals or overseas ventures.

Co-financing among financial institutions is gaining importance in the global ship financing market as a way to accommodate the growing size of deals involving ultra-large and high value-added vessels.

Co-financing among export credit agencies (ECAs), in particular, have become a crucial element of success in ship financing as European commercial banks have withdrawn en masse from the market.

Hence Korea Eximbank's emphasis on taking full advantage of its network with other ECAs to facilitate Korean ship exports.

Korea Eximbank also plans to expand its areas of cooperation with China Eximbank from shipbuilding to petrochemicals and other industries.

Meanwhile, the container vessels scheduled for completion and delivery by DSME in the second half of 2015 will be chartered by MSFL to the world's second-largest shipping line, Mediterranean Shipping Company of Switzerland for 17 years.