Borrower Fails to Repay Loan
The Export-Import Bank of Korea (Korea Eximbank) provided a loan of about 260 billion won to a U.S. shale gas developer, taking oil and gas fields as security, but about 220 billion won of the loan was not repaid.
This was disclosed by an audit report released by the Board of Audit and Inspection (BAI) on March 29.
According to the BAI report, Korea Eximbank received an application for a loan of US$225 million (about 274.6 billion won) from Atinum Energy, a company participating in a shale gas project, in June 2015. The bank provided US$217 million (about 264.8 billion won) until February 2016.
During the loan review process, Korea Eximbank received a technical analysis report from an outside company. The report estimated the oil and gas reserves of Atinum's gas field at net present value (NPV) of US$313 million. However, the bank actually used another estimate calculated by a different company employed by Atinum Energy, which put the NPV at US$491 million.
The BAI pointed out that, if the bank used the NPV of US$313 million, the ratio of loans to collateral value reached 71.8 percent, significantly exceeding the appropriate ratio range of 40 percent to 60 percent.
In addition, the BAI has confirmed that Company “A,” a partner of Atinum Energy, wrote in its annual report that “Additional drilling work in the oil and gas field will be delayed due to a drop in oil and gas prices,” and “Drilling work was put on hold beginning from the second quarter of 2015.” Although Korea Eximbank was aware of these facts, it proceeded with loan deliberation. Rather, the state-run bank wrote in its deliberation document that “It appears that development of the oil and gas field in question can be sustained even when oil prices slide.”
In the end, Atinum Energy failed to repay the principal and interest until September 2019, the maturity date of the loan. In December 2020, the principal of US$180 million (about 220 billion won) was finally amortized.
Meanwhile, the BAI pointed out in an audit report on Korea Trade Insurance Corp. that the corporation inflated its performance in its annual report for 2018 by using an evaluation method that differed from the one used for the preceding five years.
In addition, the corporation made the mistake of classifying 95 medium-sized enterprises as small ones, which resulted in incorrect calculation of premium discount rates for the companies. The BAI advised the corporation to take corrective measures.