The state-run Korea Development Bank on Monday denied speculations by local media that it granted an over-the-limit loan to Chonghaejin Marine Co., the operator of the sunken ferry Sewol.
Seoul Shinmun and Kyunghyang Shinmun said on Sunday that KDB had overestimated the security value of the aging ferry when it granted a 10 billion won ($9.6 million) loan to the financially pressed marine company in 2012.
On Monday, Yonhap reported that Chonghaejin Marine Co. misrepresented the condition of the ferry through partial renovations to get a bigger loan.
“The loan was not manipulated, as the ship was legitimately in action and the amount of the loan was within the value limit,” KDB said in a statement released shortly after the reports surfaced.
Sewol, which was built back in 1994, was to be scrapped this year after 20 years of operation but was granted another five years by undergoing a full-scale renovation in February 2013.
But this was on the condition that it received an annual quality inspection.
Also, KDB’s loan to Chonghaejin Marine Co. took place in October 2012, meaning it was not influenced by the renovation or any consequent value changes, according to officials.
The loan was paid out directly to the former owner of the ship and to the ship-renovating company, officials explained, dismissing speculation that the money was somehow misappropriated by Chonghaejin Marine Co.
According to an audit report in 2011, Chonghaejin Marine Co. recorded 280 percent in debts compared to assets due to a prolonged slump in the shipping industry.
KDB denied that it is conventional for state-run banks to support up to 100 percent of the requested amount when it comes to small and medium-sized companies with difficulties finding banks willing to extend large-scale loans.
“In the case of Chonghaejin, we took the financial risk into consideration and only granted 68 percent (of the total amount needed to purchase and renovate the ship).”
Since its ceremonial launch back in 1994, the ferry operated in the south sea of Kyushu, Japan, for 18 years until it was sold to Chonghaejin Marine Co.
In an aim to increase the capacity and to lure group passengers, the marine company built additional cabins on the fifth floor of the ship’s rear area, which is suspected to be one of the reasons for the sinking.
Rumors and speculation surrounding the Sewol have been escalating here, with many turning out to be fabricated or based on unconfirmed facts or figures.
The authorities said they would be taking firm legal action against the culprits.
By Bae Hyun-jung (email@example.com)