Korea Ocean Business Corporation Provides 660 Billion KRW Liquidity to Stabilize Shipping Companies' Management

Hwang Hoseon, President of the Korea Ocean Business Corporation. (Photo by file)

[Asia Economy Reporter Joo Sang-don] Korea Ocean Business Corporation (KOBC) announced on the 11th that it will provide liquidity support totaling 660 billion KRW to proactively respond to the management crisis of shipping companies caused by the global spread and prolonged impact of the novel coronavirus infection (COVID-19). This liquidity support project was prepared as a follow-up measure to the "Additional Financial Support Measures for the Shipping Industry in Response to COVID-19" announced by the Ministry of Oceans and Fisheries on the 23rd of last month.

KOBC held a board meeting on the 8th and finalized liquidity support plans in five areas, including corporate bond purchases for stabilizing shipping companies' management, expansion of sale and leaseback (S&LB) after ship purchases, and implementation of subordinated ship financing investments.

Accordingly, the S&LB support conditions currently promoted by the corporation will be temporarily relaxed and operated. The loan-to-value ratio (LTV) recognized for ships as collateral will be raised up to 90%. Principal and interest repayment deferral of up to six months after execution is also possible. The project budget will be expanded from the existing 100 billion KRW to 200 billion KRW.

An additional 100 billion KRW of liquidity will be supplied through subordinated investments in existing ships owned by shipping companies. The LTV of ships will be applied up to 95%, and investments will be made based on the residual ship value after deducting existing financial balances to alleviate the funding shortage of shipping companies. Depending on the corporation's internal credit rating, support of up to 10 billion KRW per shipping company is available.

Furthermore, by the corporation's special contribution and purchase of subordinated securitized bonds in the Credit Guarantee Fund's "COVID-19 Corporate Bond Issuance Support Program (P-CBO)," the shipping companies' inclusion ratio will be expanded up to approximately 260 billion KRW and supplied.

For medium-sized and small shipping companies struggling to secure liquidity, the corporation will provide emergency liquidity by purchasing corporate bonds. The support scale totals 100 billion KRW, and differentiated support up to 5 billion KRW will be provided based on the corporation's internal credit rating and the shipping companies' financial status.

Support measures have also been prepared in case the need for restructuring among shipping companies arises due to the prolonged COVID-19 situation. When pursuing mergers and acquisitions among domestic shipping companies, the corporation will directly invest in the acquired or merged companies or provide funds to the acquiring or merged companies. If employment is maintained in the acquired or merged companies during the restructuring process and the acquiring or merged companies have stable management conditions, support of up to 100 billion KRW will be provided.

Hwang Ho-seon, president of KOBC, said, "As the COVID-19 situation prolongs, the damage to the shipping industry is expected to increase," adding, "The corporation will strengthen its role as a financial safety net for the shipping industry and strive to minimize management damage through proactive liquidity support, as well as maintain employment in this key industry."

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