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South Korea pledges $1bn to support ailing shipping sector

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The South Korean government has pledged a hefty KRW1.25trn ($1bn) to support the country’s ailing shipping industry severely impacted by the coronavirus (COVID-19) outbreak.

The aid to shipping is part of a government KRW40trn emergency relief package to seven key industries including shipping, so as to cushion the impact of COVID-19.

The KRW1.25trn financing measure was announced on Thursday by Moon Seong-hyeok, minister of the Ministry of Oceans and Fisheries (MOF).

Amongst several measures under the shipping relief package, the Korea Maritime Promotion Corporation (KMPC) will provide KRW100bn in subordinate debt investments. The plan is to expand the collateral loan-to-value ratio up to 95% in order to free up liquidity to shipping companies with existing financing. The current loan-to-value ratio is between 60-80%.

The Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC) will provide KRW470bn for the repayment of maturing debts of shipowner HMM.

For small to medium-sized shipping firms facing short term liquidity crisis, the KOBC has set aside up to KRW100bn for the purchase of the eligible companies’ corporate bonds.

“When considering the characteristics of the shipping industry, which has a time lag between global economic deterioration and decreased sales, the damage is expected to increase after the second quarter,” Moon said.