Korean Development Bank (KDB) has announced a letter of credit (L/C) based deal that will enable the Daewoo Mangalia Heavy Industries Shipyard (DMHIS) in south-eastern Romania to undertake a major new order worth half a billion US dollars.

The joint Korean-Romanian ship building company is to deliver by 2009, six container-carrier ships to the German company Hamburg South, which is part of the massive Oetker Group.

Record deal

The ships in the DMHIS deal with Hamburg South are of the Post-Panamax type and they are massive. With a construction width of 40 metres, the ships are the biggest ever to be built, not only by Romania shipyards but also by shipyards across all of the Black Sea.

Romania's shipbuilding sector has enjoyed something of a revival recently and appears to be becoming competitive once again, this time round tapping markets where ship owners are forced to replace vessels to achieve scale economies or to meet tough new regulations.

Deal structure

In this deal, KDB has issued letters of credit to the value of US$400 million dollars in order to ensure the capital inflows necessary to finance the shipbuilding process.

The L/Cs issued by KDB, which is also a DMHIS shareholder, act as guarantee cover for 80 per cent of the total US$500,00 contract value for the construction of the container ships.

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