Liquidity Support of 1.25 Trillion KRW for Shipping Companies Affected by COVID-19... 470 Billion KRW Support for Hyundai Merchant Marine

Ship Collateral Ratio Raised Up to 95%

S&LB, Principal and Interest Payment Deferral... Expansion of 2020 Business Scale

Moon Sung-hyuk, Minister of Oceans and Fisheries. (File photo)
[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] The government has decided to provide liquidity support totaling 1.25 trillion KRW to shipping companies affected by the spread of the novel coronavirus disease (COVID-19). In particular, up to 470 billion KRW will be provided to the national deep-sea shipping company HMM (formerly Hyundai Merchant Marine).

The Ministry of Oceans and Fisheries announced on the 23rd at the '15th COVID-19 Response Economic Ministers' Meeting and 5th Crisis Management Meeting' held at the Government Seoul Office that it has prepared and will implement support measures for the shipping industry containing these details.

First, regarding ship financing support, the Korea Ocean Business Corporation will invest a total of 100 billion KRW in subordinated investments for shipping companies' existing vessels. The current ship collateral ratio (LTV), which is at 60-80%, will be expanded up to a maximum of 95%, supplying additional liquidity for vessels with existing financing. Furthermore, if shipping companies that have received existing ship financing support from the Korea Development Bank and the Export-Import Bank of Korea face liquidity difficulties, additional policy financing through the 'Period Industry Stabilization Fund' announced at the emergency economic meeting held the previous day will also be provided.

For all ships under the Korea Ocean Business Corporation's existing sale and leaseback (S&LB) arrangements, principal and interest payments for 2020 will be deferred. According to the '1st Shipping and Port Sector Support Measures' announced on February 17, which previously applied only to vessels operating on the Korea-China route, the scope of principal and interest payment deferral has been expanded to all vessels, with a total of 23 vessels receiving deferrals amounting to 28.86 billion KRW annually. Additionally, the 2020 budget for S&LB promoted by the Korea Ocean Business Corporation and the Asset Management Corporation will be increased from 100 billion KRW to 200 billion KRW. The Asset Management Corporation plans to exhaust 100 billion KRW of the 200 billion KRW budget in the first half of the year to supply liquidity more swiftly.

New liquidity support will also be provided. The Ministry of Oceans and Fisheries plans to secure up to 260 billion KRW worth of shipping company bonds within the 1.68 trillion KRW 'COVID-19 Corporate Bond Issuance Support Program (P-CBO)' of the Korea Credit Guarantee Fund. The Korea Ocean Business Corporation will participate as a subordinated investor in the corporate bond issuance support program to increase the proportion of shipping company bonds and reduce the burden of subordinated purchases on companies.

For small and medium-sized shipping companies facing short-term liquidity crises, the Korea Ocean Business Corporation will purchase corporate bonds of small and medium-sized shipping companies up to 100 billion KRW to provide emergency liquidity support. If shipping companies meet the support conditions, the screening process will be simplified to enable prompt assistance.

Moreover, when mergers and acquisitions are pursued among national shipping companies, the Korea Ocean Business Corporation will directly invest in the acquired or merged companies or provide funds to the acquiring or merged companies. Up to 100 billion KRW will be supported if employment is maintained in the acquired or merged companies during the restructuring process and if the acquisition or merger is stable under the management conditions of the acquiring or merged companies.

In particular, considering the financial market situation, up to 470 billion KRW for maturing ship financing repayments and other amounts will be supported by the Korea Development Bank and the Korea Ocean Business Corporation, which jointly manage operations as the main creditors for HMM.

Moon Sung-hyuk, Minister of Oceans and Fisheries, said, "Considering the characteristics of the shipping industry, where there is a time lag between global economic downturn and sales decline, damage is expected to increase after the second quarter," adding, "We hope that this measure will proactively provide liquidity to shipping companies and minimize damage."

This content was produced with the assistance of AI translation services.