Banks to issue refund guarantee for HHI

Local banks decided to issue a refund guarantee for Hyundai Heavy Industries, allowing the company to go ahead with ship-building projects, sources said Sunday.

According to the financial sources, seven banks, including the firm’s main creditor KEB Hana Bank, made the decision to issue the refund guarantee for the company by early next month. 

A refund guarantee is a form of security for purchasers who normally pay for a substantial part of the vessels in advance of delivery. A ship-building contract is only completed when banks approve of the refund guarantee.

Although Hyundai Heavy Industries received orders to build two very large crude carriers from a Greek ship owner last month, it faced hurdles in carrying out the projects, as it could not get a refund guarantee issued by the banks.

Since large-scale restructuring plans were initiated for Korea’s major shipbuilders, banks have started to reduce refund guarantees.

By Lee Hyun-jeong (rene@heraldcorp.com)