Wednesday, October 16, 2019
Korea Eximbank to Finance Scorpio Tankers for US$3oo Million
World’s First Ship-covered Bond Deal
Korea Eximbank to Finance Scorpio Tankers for US$3oo Million
  • By matthew
  • April 14, 2014, 07:49
Share articles

From left, DNB Markets Managing Director and CEO Ted Jadick, Scorpio Tankers Chief Operating Officer Cameron Mackey, KEXIM Bank President Lee Duk-hoon, and JP Morgan Managing Director Michael Clare after signing the financing deal on April 2.
From left, DNB Markets Managing Director and CEO Ted Jadick, Scorpio Tankers Chief Operating Officer Cameron Mackey, KEXIM Bank President Lee Duk-hoon, and JP Morgan Managing Director Michael Clare after signing the financing deal on April 2.

 

The Export-Import Bank of Korea (Korea Eximbank) announced on April 2 (local time) in New York that it concluded a vessel financing deal that will finance U.S.-based Scorpio Tankers for a total of US$300 million, including US$175 million in direct finance and US$125 million in vessel-backed bonds.

Lee Duk-hoon, Korea Eximbank Bank’s president, signed the deal with Cameron Mackey, chief operating officer of Scorpio Tankers, at the latter’s headquarters in New York.

As if to reflect local interest, the signing ceremony was attended by many shipping and shipbuilding journalists such as reporters from Marine Money and TradeWinds, as well as financial moguls such as DNB Markets CEO Ted Jadick, JP Morgan Managing Director Michael Clare, and A&O’s Paul Nelson, accompanied by their law firm partners.

Korea Eximbank’s deal this time is to fund the Scorpio Tankers’ purchasing of oil carriers from local shipbuilders. The latter had placed orders with three Korean shipbuilding companies including Hyundai Mipo Dockyard, Inc.

Scorpio Tankers is an American oil tanker specialized shipping company that is at the forefront of the eco-ship movement in the global shipping markets. The company placed orders of 57 high-fuel-efficient vessels with the local shipbuilding companies last year.

The financial deal is noteworthy in that Exim Bank signed, on top of the loan contract of US$175 million, a US$125 million vessel-backed bond agreement for the first time among export credit agencies in the world.

The vessel-backed bond is a financial product that allows an overseas ship owner to issue a bond to finance its ship purchasing from Korea’s shipbuilders, while Korea Eximbank guarantees the bond’s principal.

It has the merit of expanding and diversifying funding methods via Korea Eximbank’s guaranteeing of the ship owner’s bonds so that overseas investors can utilize the funds more easily, which will boost the local shipbuilders’ exports.

The local financial institution had approved the bond guarantee in September last year to support the local shipbuilders’ order procurement, recently wrapped up negotiations with the investment banks and ship owners, and finally concluded the bond guarantee agreement on April 2.
For the global shipping finance markets, ECAs like Korea Eximbank are growing to be more important than ever, as their traditional finance sources of European banks have drastically scaled down their loans.

Earlier the bank had approved bond guarantees for the local shipping company’s ship orders, and other prestigious overseas shipping companies are also sounding out the possibility of financial support via bond guarantees from the bank.

The bank president said at the signing ceremony, “Korea Eximbank Bank will lead in the ship financing industry via various financial products such as direct loans, debt guarantees, and bond guarantees, and will provide optimal customized financing tailored to each ship owner and transaction. We will not spare any effort in securing a growth drive in the shipping and shipbuilding industries.”

The bank is planning to finance local and overseas shipping companies, using the ship owner financing method, or a total of US$4 billion, 27 percent higher than last year, mainly to fund high-value-added ships such as eco ships, oil drillers, and LNG carriers.

The bank will also encourage other institutions such as local banks, insurance companies, and the national pension service to participate in vessel export financing via providing bond and debt guarantees.