IBK to issue refund guarantee to Samsung Heavy Industries

The state-run Industrial Bank of Korea has decided to issue a refund guarantee to Samsung Heavy Industries, supporting the company in its latest shipbuilding deal, industry sources said Thursday.

Samsung Heavy Industries on Wednesday clinched a deal worth 240 billion won ($220 million) to build four oil tankers for Norwegian company Viken. This is the company’s second order obtained this year. 

A refund guarantee is a form of security for purchasers who generally pay for a substantial part of vessels in advance of delivery. The issuance of a refund guarantee is considered the final step of a shipbuilding contract.

The Industrial Bank of Korea has already issued a refund guarantee for the first contract to construct two liquefied natural gas carriers, an order which the company clinched from Monaco’s GasLog late last month.

The decision comes amid banks starting to reduce refund guarantees since large-scale restructuring plans were initiated for Korea’s major shipbuilders amid the aggravated shipbuilding market.

In August, Hyundai Heavy Industries struggled to get a refund guarantee issued by banks for a deal to build two large crude carriers for a Greek company. It took about one month to collect refund guarantees from seven different banks and finalize the deal.

The IBK, however, has not cut the credit limit for the shipbuilding industry, securing room for refund guarantees for shipbuilders, the bank said.

Samsung Heavy Industries, meanwhile, is seeking to achieve more deals valued at a combined 3 trillion won, including those for the construction of offshore facilities.

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