[THE INVESTOR] The Industrial Bank of Korea  has issued a refund guarantee to Samsung Heavy Industries that has just won a new order in almost one year.

The shipyard secured a 420 billion won (US$380million) deal late last month to build two LNG carriers with a European customer. The deal came as local shipyards are suffering from a sharp decline in new orders amid a protracted industry-wide slump.

Samsung Heavy is also set to win more deals valued at a combined 3 trillion won, including a contract to build offshore facilities.

A refund guarantee issued by a shipyard‘s bank is important for a ship owner when ordering a new vessel from a shipyard. If the shipyard defaults, the bank’s refund guarantee provides the ship owner with the money already paid.

Without a refund guarantee, winning a new deal is almost impossible for a shipyard. Earlier, a group of banks refused to issue a refund guarantee for a new deal clinched by Hyundai Heavy Industries, another local shipyard, out of concerns for their large credit exposure.

(theinvestor@heraldcorp.com)