Busan: The truckers might have returned to work, but Korea's premier port of Busan has been hit with yet more bad news. Local newspaper Busan Daily reports: "The project financing lenders to Pusan Newport Co are said to have sent a legal notice to the borrower regarding defaulting on payments."
Allegedly, the intercreditor agent of the lenders, Calyon, sent a letter to PNC on the June 12 saying that there existed certain defaults, and as such, the lenders had the right to exercise draw stop for the loan drawdown scheduled in August.
Eight local financial institutions have set the investment limit of 350bn won, while 13 offshore banks such as Calyon have set it at $465m. 60% of the aforementioned loan has been executed.
Calyon is said to have expressed in the letter doubts on PNC's ability to fund the repayment of loans, and added that if PNC fails to propose a loan restructuring plan, they would have no choice but to take enforcement actions.
PNC is constructing 3.2km of continuous quay wall out of the total thirty berths of the overall Busan New Port Project. It opened in January 2006 and shareholders include Samsung, DP World, Hanjin Heavy and Hyundai.
"Should the lenders stop the future loans, PNC which is already in financial trouble will be faced with serious liquidity crisis," the Busan Daily stated. Calyon is said to have quoted the government's failure to build hinterland railway and roads; as well as PNC's failure to attract shipping lines as the two main reasons for its financial failure.
Repayment of the loan is set to start in 2010 but "for a company that has not yielded any profit so far, it is doubtful that PNC would be able to repay it," the paper stated adding that negotiations to postpone the repayment to 2011 are ongoing. [20/6/08]
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