Korea Export Bank to Overshoot 2011 Debt Sale Target as Ship Orders Boom

Export-Import Bank of Korea, the state-run lender known as Kexim, boosted its 2011 fundraising target by about 10 percent as it helps finance A.P. Moller- Maersk A/S’s order for the world’s largest ships.

The state-run bank will exceed a plan set this year to raise $8.8 billion through bonds and loans, Chief Executive Officer Kim Yong Hwan said yesterday. Kexim will issue more debt in currencies other than dollars, such as pounds, he said.

“A lot of the companies want to get financing in place before major contracts are awarded and that’s why financing is becoming more important,” Kim said in an interview in Seoul. “It’s crucial for us to get more funding quickly.”

Kexim plans to provide loans to Copenhagen-based Maersk to build as many as 30 of the world’s biggest container ships, an order that could be worth $5.4 billion, Kim said. Political upheaval in the Middle East is adding urgency to the fundraising plan because it may drive yields higher, he said.

“We want to raise funds as soon as we can before the situation in the Middle East and Africa worsens,” Kim said. “We also want to make sure we have plenty of funds in place.”

The $8.8 billion fund-raising target is a record for Kexim, according to the company. In 2010 it raised $8.3 billion, of which $4.4 billion was in dollars and the remainder in currencies such as the Hong Kong and Singapore dollars, Indian rupees and Brazilian real.

Photographer: SeongJoon Cho/Bloomberg

Kim Yong Hwan, chief executive officer of the Export-Import Bank of Korea. Close

Kim Yong Hwan, chief executive officer of the Export-Import Bank of Korea.

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Photographer: SeongJoon Cho/Bloomberg

Kim Yong Hwan, chief executive officer of the Export-Import Bank of Korea.

Kexim is considering selling U.K. sterling bonds and wants to spread its funding sources to include emerging countries, Kim said, without specifying which markets.

Shipbuilders, Refiners

The weighted-average coupon on Kexim’s outstanding bonds is currently 4.8 percent, compared with 5.5 percent in the first quarter of 2010, according to data compiled by Bloomberg.

About half of Kexim-backed industry funding this year will go to shipbuilding and projects such as refineries and power, as orders are expected rise at least 10 percent according to government estimates.

South Korean builders may win more than $70 billion of overseas orders this year, the Transport Ministry estimates. The world’s top six shipyards, all based in South Korea, aim to garner $50.1 billion of contracts this year, 33 percent more than in 2010, the Knowledge Economy Ministry has said.

Kexim expects to agree by the year’s end how much funding it will provide for a nuclear power plant order from the United Arab Emirates, Kim said. South Korea, led by Korea Electric Power Corp. (015760), won the project in December 2009, the country’s first overseas nuclear power plant contract. Kim said Kexim offered to provide as much as $10 billion in its 2009 proposal.

Japan Rivalry

South Korea is competing with countries including Japan and China to support exports of equipment and technology by winning infrastructure projects worldwide. Like Kexim, the state-run Japan Bank for International Cooperation is increasing funding for companies bidding for work abroad.

“To maintain our lead in technology and quality over China and Japan, we need to make sure there are enough funds available for South Korean companies as they have ample funds in hand,” Kim said.

JBIC is considering financial assistance for Toshiba Corp. in its bid to build a nuclear power station in Turkey, Tadashi Maeda, head of corporate planning at the state-owned Japanese bank, said in an interview on Feb. 28.

South Korea aims to secure $400 billion of contracts by 2030 as demand for nuclear energy increases. Korea Electric has said it’s seeking to build reactors in India and Malaysia, and considers South Africa, Thailand, Kuwait and Saudi Arabia as potential markets.

South Korean builders and train makers plan to jointly bid to build and operate a high-speed railway in Brazil, competing with rivals in China and Japan.

Kexim expects the Korean government to decide as early as the first half of 2011 on a request to increase its capital to help improve its funding capacity, Kim said. The lender also plans to provide funds for renewable energy projects, he said.

To contact the reporters on this story: Seonjin Cha in Seoul at scha2@bloomberg.net; Kyunghee Park in Seoul at kpark3@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

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