The Export-Import Bank of Korea (Korea EXIM) is withholding advance payments for Maersk ship orders from Daewoo Shipbuilding & Marine Engineering (DSME).
This has resulted in friction between the shipbuilder’s two biggest creditors, Korea Development Bank and Korea EXIM.
DSME, South Korea’s third-biggest shipbuilder, found itself in trouble after admitting it had kept KRW3 trillion (USD2.5 billion) in losses from offshore plant orders off its balance sheet.
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The action of Korea EXIM is expected to worsen the shipbuilder’s debts, which stood at KRW15 trillion on 30 June.
The opposing views of the creditor banks came to light at the point of financing Maersk’s order, placed in June, for 11 container ships of 19,630 teu.
The total contract value is USD1.8 billion. KDB has provided refund guarantees for five of the ships, while Korea EXIM is doing the same for the other six ships. The refund guarantees ensure a shipowner is refunded if a vessel is not completed.
The differences arose when KDB immediately paid DSME the entire amount it collected from Maersk. Korea EXIM, on the other hand, withheld the USD75.3 million it received.
The export credit agency said it would pay the necessary expenses for the ship designs while disbursing the remaining funds when construction of the Maersk ships starts from March 2016. And it explained that it intended to hold on to the funds because DSME’s credit rating had fallen.
Korea EXIM CEO Lee Duk-hoon said the bank would be more wary of heavy-tail payments, whereby the customer pays the bulk of the contract value towards the completion of construction.