KDB issues refund guarantee for Daewoo's latest deal

By a2016032

Published : May 11, 2017 - 14:25 Updated : May 11, 2017 - 14:25

The state-run Korean Development Bank, the largest creditor of Daewoo Shipbuilding & Marine Engineering Co., a troubled shipbuilder here, has issued a refund guarantee for the shipyard's latest deal, ending a one-month tussle over how to help it complete the contract, industry sources said Thursday.

On April 4, Daewoo Shipbuilding clinched a $250 million deal to build three very large crude carriers. Under the deal with Maran Tankers Management, a unit of Greece's largest shipper Angelicoussis Shipping Group, Daewoo Shipbuilding will deliver the 318,000-ton VLCCs by 2018.

(Yonhap)

The deal came as the shipyard is suffering from a sharp decline in new orders amid a protracted industry-wide slump.

The RG had been a sticky issue among creditors of Daewoo Shipbuilding in their efforts to resuscitate the company teetering on insolvency with a 6.7 trillion won ($5.94 billion) rescue deal. They have been hesitant to volunteer for guarantees, fearing the colossal financial burden should the company become unable to fulfill new orders.

An RG is a form of security for the ship purchaser, which usually makes advance payments on an order. In case the ordered vessel cannot be delivered, the bank that has taken on the RG of the shipbuilder would make the refund. Without such a guarantee, it's virtually impossible for a shipyard to get orders.

In March, the creditors led by the KDB announced a fresh rescue package for the ailing shipbuilder, the second round of bailouts for the shipbuilder that has been suffering from severe liquidity problems over heavy losses in its offshore projects.

After weeks of negotiation, Daewoo Shipbuilding's bondholders, including the National Pension Service agreed to the rescue package, paving the way for the shipyard to receive a fresh cash injection of 2.9 trillion won. (Yonhap)