An increasing number of South Korean private banks are becoming reluctant to provide refund guarantee for South Korean shipbuilders currently going through restructuring processes. This is blocking the shipbuilders’ new contracts and making main creditor banks edgy.
According to industry sources, KEB Hana Bank, which is the main creditor bank for Hyundai Heavy Industries, met with private banks on July 13 and asked them to participate in new refund guarantee for Hyundai Heavy Industries. At present, the Korea Development Bank, the Export-Import Bank of Korea and the Korea Trade Insurance Corporation are planning to provide a refund guarantee of up to US$5 billion for Daewoo Shipbuilding & Marine Engineering, but Samsung Heavy Industries and Hyundai Heavy Industries are finding it difficult to clinch any new contract without the help of private banks.
Hyundai Heavy Industries won contracts for two LNG carriers in late May this year from SK E&S. However, banks refused to provide refund guarantee for almost a month and the contracts was about to go up in smoke. Sungdong Shipbuilding & Marine Engineering obtained four oil carrier contracts in Greece early last month but has yet to be provided with refund guarantee.
Private banks have their own reasons for passiveness. For example, Woori Bank has to deal with its privatization issue and Nonghyup Bank is in the red. Shinhan Bank and KB Kookmin Bank are unwilling to take risks with Woori and Nonghyup not shouldering the burden.