Financial institutions decided to raise Yeochun NCC's import letter of credit limit to $300 million to respond to naphtha supply instability stemming from the Iran situation.
Korea Development Bank and seven other creditor institutions held the "Council of Creditor Financial Institutions" on the 7th and put forward an emergency financing plan to support Yeochun NCC's naphtha supply stability. The plan would raise the naphtha import letter of credit (L/C; Letter of Credit) limit to $300 million.
An L/C is a payment method in which a bank guarantees payment to the seller on behalf of the importer. The proposed financing plan is set to be implemented on the 18th after a resolution by the Council of Creditor Financial Institutions on the 15th.
Creditor financial institutions for Yeochun NCC include Korea Development Bank, KB Kookmin, Woori, Hana, Shinhan, NongHyup and Export-Import Bank of Korea. With the Middle East situation persisting, Yeochun NCC applied to its main creditor bank, Korea Development Bank, on the 29th of last month to expand the L/C limit to secure a stable naphtha supply.
In response, Korea Development Bank swiftly launched a simplified due diligence, shortening the L/C limit expansion period—which typically took more than six weeks—to about two weeks with cooperation from the creditor financial institutions. Korea Trade Insurance Corporation also plans to backstop the financial sector's support by providing $50 million in import insurance.
Korea Development Bank expected that with this support, Yeochun NCC would be able to secure funds for naphtha import settlements in a timely manner even amid high oil prices and maintain operating rates at a stable level even in emergencies.
An official at the Financial Services Commission said, "With this financial support, Yeochun NCC is expected to import naphtha smoothly even in emergencies such as a sharp rise in naphtha prices."