The Korea Trade Insurance Corporation and Export-Import Bank are supporting a total of $5.2 billion (7.267 trillion won) in export financing for Hyundai Rotem's second export of K2 tanks to Poland.
According to the financial sector on the 1st, the Korea Trade Insurance Corporation and Export-Import Bank will sign a memorandum of understanding (MOU) with the Bank Gospodarstwa Krajowego (BGK) regarding this export financing support. The Korea Trade Insurance Corporation and Export-Import Bank will support $5.2 billion, which is about 80% of the total export contract amount of $6.5 billion. The Korea Trade Insurance Corporation will bear $3.9 billion, while Export-Import Bank will take on $1.3 billion.
The Korea Trade Insurance Corporation supports export financing by providing guarantees so that the Polish government can borrow purchase funds at low interest rates from other financial institutions. BGK has been able to secure funding from financial institutions reliably thanks to the guarantee from the Korea Trade Insurance Corporation.
Export-Import Bank participated complementarily this time due to regulations on 'the same borrower credit limit', having provided $5 billion in export financing during the first Polish defense export. Under the Export-Import Bank Act, Export-Import Bank can only provide loans or guarantees to the same corporations up to 40% of its own capital.
Based on this MOU, the Korea Trade Insurance Corporation and Export-Import Bank plan to issue a binding commitment letter to BGK by the end of September. After the issuance of the commitment letter, the lending financial institution will be selected by BGK.
It is reported that the second contract with Hyundai Rotem includes a condition stating that 'the effect will occur if there is financial support from the government.' The government explained that for large-scale defense contracts, the nature of government-to-government (G2G) contracts is strong, and because the export amount is significant, it is an international practice for the exporting country to support that with policy financing and guarantees.
Meanwhile, Hyundai Rotem recently announced that it has completed negotiations for the second contract for K2 tanks and will soon sign the contract. The second contract amounts to double that of the first ($4.5 trillion won). The Polish government is sequentially introducing domestic weapon systems, including K2 tanks, K9 self-propelled howitzers, FA-50s, and Cheonmu, in response to the sharply heightened security levels in 2022.