The Korea Development Bank (KDB) said on Nov. 30 that it finalized a syndication loan of 2.1 trillion won for S-Oil’s 5 trillion-won project to build high-grade multiple chemical production facilities at its Ulsan Industrial Complex in Ulsan, Korea.
The state-owned bank said it was able to form a syndicate, even though current difficult times have been brought on by the sluggish shipbuilding sector and steel industries made worse by the U.S. Fed’s move to increase its basic interest rate. KDB decided to chip 700 billion won in to the syndication loan, which encouraged other banks to participate as well.
All told, nine financial institutions and KDB joined the syndication including a Chinese bank, the China Transportation Bank, which participated in a Korean syndication loan in Korean currency for the first time. Other financial institutions included KDB, KB Kookmin Bank, KEB Hana, Shinhan Bank, and Hanwha Life Insurance, among others.
S-Oil’s project involves oil residue cracking facilities and the production of high-degree olefin at a cost of 5 trillion won, including 1.9 trillion won of its own investment and a loan of 3.1 trillion won. The end products are high-quality gasoline, polypropylene and propylene oxide.
The significance of the syndication loan is that it will help spur the economy, drawing financial institutions to participate in large projects to drum up business investments. The project will also help the local economy get out of its slump and play a role in creating jobs in the region.
KDB has been able to boost its position as a top financial institution as a lead manager for syndication loans, demonstrating its capacity to draw in conservative domestic financial institutions and foreign banks, getting out of its tight risk management policies.
A KDB official said it has been working to perk up the economy by inducing financial institutions to provide financial support to domestic firms’ facility projects, which would also lead to those companies making more investments in their facilities. KDB’s successful arrangement of the syndication loan to S-Oil will be a boost to the business firms’ operations and the rejuvenation of the economy by creating jobs around the country.
The Business Investment Promotion Program is drawn from the 2015 Economic Policy Direction announced on Dec. 22, 2014 by the government to boost economic activities around the country by sharing the investment risks with business firms to secure some 30 trillion won worth of new investments in new business facilities.
KDB will chip in 15 trillion won, while the civilian sector will invest 15 trillion won for business facilities. As of Oct. 31, some 11.2 trillion won worth of new investment projects were selected as targets for financial support by KDB.
The program got underway in February 2015 for all corporations engaged in businesses with the areas of support limited to large investment projects, new growth areas, and firms with superior technologies and traditional major businesses.
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A view of the S-Oil Refining Complex in Ulsan, Korea.(Photo:S-Oil)
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