Korean ocean liners just may reach 300% debt to asset ratio with sell-

Korean shipping companies have been concentrating on selling vessels t
o satisfy the stern 200 percent debt to asset ratio criteria set by th
e Korean government during the Asian currency crisis, with few compani
es able to commission new vessels, asserted representative Huh Tae-yol
of the opposition Grand National Party.
According to a report released by representative Huh, the government h
as weakened the shipping industry's international competitiveness by a
pplying a blanket policy debt to asset ratio down of 200 percent to al
l kinds of industries, ignoring industry peculiarities.
Eighty percent of the shipping industry? capital comes from outside s
ources. Usually other countries' shipping industries' debt to asset ra
tio hovers at around 600 - 700 percent. The Korean government lent mon
ey for 80 percent of shipbuilding as a part of its shipbuilding plan f
rom 1973 to 1993.
Korean shipping companies' debt ratio decreased down to 7,166 percent
in 1997, 714 percent in 1998 and 339 percent in 1999. Expert said that
it is too hard to reach the debt criteria even if shipping companies
try to lessen their debt to asset ratios by selling-off vessels, their
sales tools, and fixed assets.
The reports indicated that shipping companies lost around 353.7 billio
n won by selling a total of 64 vessels, 24 full container ships, 21 bu
lk carriers, 9 car carriers, and 3 LNG vessels amongst others. If appl
ied to the current exchange rate, about 1,200 won to the dollar, the d
amage recorded for "C" shipping company's 8 vessels amounts to 96.1 bi
llion won, "H" shipping company's 12 vessels, 87 billion won, "P" ship
ping company's 10 vessels, 75.6 billion won, and "D" shipping company'
s 6 vessel sell-off lost 55.6 billion won. In addition, "S" shipping l
ost 9.8 billion won on 2 vessels, "N" shipping about 7.6 billion won o
n 3 vessels, and "H" marine 690 million won on 9 vessels.
Korean shipping companies earned 102 trillion won on tariff income, sh
ipping companies transported 99.8% of all cargoes to and from Korea by
sea, with the remaining 0.2% done by air. In these situations, at the
government's insistence, the stern 200 percent debt to asset ratio co
uld provoke difficulties in acquiring vessels or getting financing for
new vessels, and increase ships sailing under a flag of convenience.