Korea's commercial banks consider providing funds for Korea's arms exporters

Five major commercial banks have been considering issuing a syndicated loan to help finance Korean companies' arms export to Poland, an industry source said Friday. [YONHAP]

Five major commercial banks have been considering issuing a syndicated loan to help finance Korean companies' arms export to Poland, an industry source said Friday.

A syndicate loan refers to a form of financing offered by a group of lenders when a project requires large loans from a single lender.

Last year, domestic companies secured major deals worth 17 trillion won ($12.9 billion) to supply K2 tanks, K9 self-propelled howitzers, FA-50 light attack aircraft and Chunmoo multiple rocket launchers to Poland.

Their bids to sign additional contracts worth 30 trillion won with Poland this year have faced obstacles as the state-run Export-Import Bank of Korea cannot provide loans and guarantees for the proposed sales after hitting its upper limit from last year's mega deals.

To address the lending limit by the state-run bank, five commercial banks — KB Kookmin, Shinhan, Hana, Woori and Nonghyup — have been in talks with the government for financial measures, according to the source.

Under the syndicated loan plan, the five banks are likely to provide about 2.7 billion dollars in an initial stage of support, the source said on condition of anonymity.

Still, the banks have been in negotiations with the government for Korea and Poland to seal the arms export deal, according to the source.

The latest move comes as Korea seeks to capitalize on its robust weapons exports to Poland to become the world's No. 4 arms exporter by 2027, up from eighth place in 2021.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]