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K -SURE makes your finance sure · Re-thinking ECA Ship Finance now & beyond · 2018 Korea-Hellenic Maritime Cooperation Forum June 2018 Hong Ik Kim Head of Tanker & Offshore Team
K-SURE makes your finance sure· Re-thinking ECA Ship Finance now & beyond ·
2018 Korea-Hellenic Maritime Cooperation Forum
June 2018
Hong Ik Kim
Head of Tanker & Offshore Team
Table of contents
1. ECA in global ship finance market
2. K-SURE story until now
3. New Objectives & Action Plan
4. Buyer Credit Program
5. Key Benefits of the Program
6. Market status & Projects under review
Safeguarding the link between shipping and shipbuilding industry
Stabilizer to a cyclicality in the shipping and ship financing
Augment commercial bank loan
Increased demand from financiers amid huge losses and stricter banking regulations
Bringing local financial institutions to global ship finance space
Professional service and direct relationship with the clients, financiers
Traditional roles of ECA
Newly-required roles of ECA
ECA in global ship finance market1
0.0 %5.0 %10.0 %15.0 %20.0 %25.0 %30.0 %35.0 %40.0 %45.0 %
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
US billlion % ECA involvement
Global Shipping & Offshore loan volume With ECA involvement Source : Dealogic, DNB
K-SURE story until now (1/3)2
Buyer credit commitment : U$14.1billion (411 vessels)
Portfolio of strategic assets : type of vessels (# of units /exposure amount)
Mega containers(55/U$3.4bil), LNGC(46/U$1.6bil), LNGBV(1/U$28mil), FSRU(4/U$502mil)
Commitment by vessel type Annual New Business Volume
① ContainerU$5.3bil
② TankerU$2.9bil
37.8%
20.4%
14.6%
5.6%
11.7%
6.4%
③ LNG
⑥ LPG① Container
U$5.3bil
② TankerU$2.9bil
④ Offshore
⑤ Bulker & Others
1.21.6
2.2 2.1
3.93.5 3.4
2.1
0.6
2.9
3.22.7
0.8
0.8 1.3
0.5
0.3
'09 '10 '11 '12 '13 '14 '15 '16 17 '18.3
Export Bond Buyer Credit
1.8
0.1TARGET
US billlion
0.0
1.0
2.0
3.0
4.0
5.0
6.0
K-SURE story until now (2/3)2
Recently Korean yard order dropped sharply in line with industry downturn. SME yard restructuring made K-SURE support shrink too
1~2 year time lag between shipbuilding contract and post-delivery financing demand
With our new business target for 2018, K-SURE portion is expected above 6% of theestimated Korean yard order of U$28.7bil
What we have seen & done so far
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018.3
Korean yard order K-SURE PortionUS billlion
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
14.0
34.5
8.6%
48.1
30.7
45.8
33.2
4.6 5.8
14.1%
24.1
4.6% 4.6%
6.8%
8.5%
10.5%
3.3%
7.4%
45.7%
15.3
K-SURE story until now (3/3)2
More collaboration with lenders
Active engagement with key clients
Strengthening market analysis and loan monitoring
Market downturn coupled with reduced capacity of banks led to ‘ flight to quality ’
Changing dynamics duly require both companies and financiers to be ‘ smarter & wiser ’
Good names enjoy market liquidity
Key lessons learned
What we have observed
Dimensions As-was As-is
Deal SizeLarge Syndicate, co-financed
with multiple ECAsClub Deal, co-financed with
commercial banks only
Deal Structure Standard & typical (corporateguarantee, long-term charter)
Customized & deal-based(project finance, shorter or no charter)
Client Quality Top tier, Big names Mid tier, lesser known players
LTV / Loan Transfers Highly leveraged (80%) / Less Modest level (65~75%) / More frequent
New Objectives & Action Plan3
Increase support for strategically important high-end, eco-friendly vessels
Embrace the New Era of LNG
Respond proactively to new financing needs
Collaboration with Korean yards for marketing
More face time with leading market players
Develop strategic relationships with partner banks
Provide indicative premium quotation at early stage
1. Maximizing the benefits of our product
2. Enhancing customer experience
Table of contents
1. ECA in global ship finance market
2. K-SURE story until now
3. New Objectives & Action Plan
4. Buyer Credit Program
5. Key Benefits of the Program
6. Market status & Projects under review
Buyer Credit Program (1/2)4
For foreign ship owners purchasing vessels from Korean ship yards
Covers the ship owner’s non-repayment risk triggered by political and/or commercial risks
Medium and Long Term(MLT) Export Insurance
Insurance Structure
Ships, Offshore vessels
Payment
Loan Repayment
MLT Export Insurance
BANK
Korean ship yard Borrower(Foreign ship owner)
Buyer Credit Program (2/2)4
Eligibility Capital goods & services supplied by Korean companies. (=Tied to export)
Risks covered Comprehensive (political and commercial risk)
Percentage of cover Usually 95%. Case-by-case up to 100%
Tenor More than 2 years, up to 10 years in principle; up to 12 years(Ship) and 14 years(PF)
Premium Rates determined case-by-case. (Ship financing not subject to the OECD MPR)
Other conditions (Principal) Equal and regular Instalments commencing 6 months from delivery
(Interest) Payment Interval at least every 6 months
Maximum amount covered Up to 85% of export contract value (Ship financing up to 80%) and,
Premium, interest before delivery
Key Benefits of the Program (1/2)5
For Ship Owners
Diversification of FundingSource
Competitive Pricing
Long-Term Financing
Supportive of Restructuring & Waivers
For Banks
Risk Mitigation
Portfolio Management
New Customer Acquisitions
Customer Satisfaction
Key considerations in underwriting (by the order of importance)
Credit profile of Borrower/Guarantor
Country Risk, Project structure, Project-specific risk
Drawdown/Repayment Period, Vessel Type (or strategic nature of the projects) etc.
1.
2.
3.
Key Benefits of the Program (2/2)5
Well recognized,
reliable source of
long-term
funding
- Higher leveraged & longer-tenor finance compared to commercial
loan (up to 80% of LTV with 12-year repayment period)
- Well regarded and proved source of funding irrespective of
market cycles
- ECA-approved transactions are well received in the market
with high recognition
Competitive
Pricing
- Average covered margin for last 3 years [ ] bps
- Average premium rate for last 3 years [ ] bps
- With prepayment, premium refund available
Market &
Client-friendly
Operation
- Speedy, flexible execution (typically less than 3M from
preliminary review to final approval)
- Supportive of waivers, debt rescheduling and restructuring
< Total number of consents approved during 2017 >· Major covenant waivers & charter contracts amendment 39· Debt Rescheduling 23· Restructuring 11 (incl. ch.11)
Market status & Projects under review6
Vessel Type Market Status
Currently under Review (# of Project) Estimated
Position in cycleConfirmed Likely Tapping
Recovery delayed due to overcapacity & decreased transportation demand.Consolidation is at work
1 - 1
Tanker : Downturn continuing due to supply overhang. NBs with scrubber are preferred in the market. Scrapping is set to increase in near future
2 3 2
LNGC : Spot rate fast on rise. Trade volume is set to grow due to new project start-ups
- 1 2
FSRU : Market expanding. Slower offshore terminal project progress.
1 - 2
Slow E&P investmentOvercapacity of floatersSteady pace of oil price increase coupled with revamped efficiency of field operations shows better sentiment for a slow recovery. S&P activities for stranded assets are often observed
1 (Semi-sub)1 (FPU)
1(Drillship)
-
Container
Tanker
Offshore
Major clients by segment7
Container * Bulker Tanker
Offshore * Special Vessel LNG * LPG * FSRU
Major Clients
K-SURE provides ECA financing for major shipping industry leaders in the world.
Basic flow of underwriting process8
Insurance
Consulting
(Submit Term Sheet)
Review T/S
and issue
Letter of Intent (LOI)
Insurance
Responsibility
Takes Effect
Issuance of
Insurance Policy
Legal review /
Internal process
for approval
Approval by
Board
Members
Due-Diligence
Applying
for LOI
Applying for
M/LT Insurance
Approval
Notice
Payment
Premium
K-SURE has simplified and quick internal process. - Typically less than 3 months from initial Term Sheet discussion to financial close
Organization Chart9
Maritime Finance DepartmentYoungkuk(Martin) KIM / Department Head
Container Team
Jaesang LEWTeam Head
Tel: +82 51 630 5410
Hyunjae KIMDeputy Director
Tel: +82 51 630 5412
Junhee CHODeputy Director
Tel: +82 51 630 5421
• Container• Plan & Strategy
• Bulker• Tanker• LNG, LPG Carrier
• Offshore Unit• FSRU, FPSO, FLNG• Special Vessel
Samee CHOIDeputy Director
Tel: +82 51 630 5420
Hansung KIMDeputy Director
Tel: +82 51 630 5431
Hong Ik KIMTeam Head
Tel: +82 51 630 5430
Tanker • Offshore Team
I believe that one of life's greatest
risks is never daring to risk.
- by Oprah Winfrey -
