The ferry Sewol operator also was found to have borrowed 10 billion won ($9.5 million) from the state-run Korea Development Bank to repair the outdated ship, which had operated for 18 years from 1994-2012 in Japan, according to audit data held by the Financial Supervisory Service.
Through repairing and remodeling operations between October 2012 and February 2013, the marine company successfully extended the years it would remain operable by another seven years until 2018.
Earlier this year, the Korean Register of Shipping endorsed the extension. The ferry was consequently able to resume cruises as of March this year.
Market insiders criticize Chonghaejin Marine for operating the worn-out ship and also for undergoing remodeling that failed to address the fundamental problems of the ferry in an attempt to dress up its financial statements for the loan.
“Considering that the average lifespan of an ordinary ship is 15 years, the ferry should have been discarded,” said a shipping expert. The ferry had already sailed for 18 years before Chonghaejin Marine imported it from Japan.
Some in the financial market alleged that the KDB issued beneficiary loans to the company by glossing over risks involving the outdated ship. KDB, however, claimed that the loan was issued in accordance with legitimate lending rules set by the state-run bank and without breaching the nation’s banking regulations.
The sunken ferry, which traveled a route between Incheon and Jeju twice a week, had a maximum capacity of 921 people, 180 vehicles and 152 shipping containers, which could be carried at the same time.
The 6,825-ton Sewol was built in June 1994 by Hayashikane Dockyard in Japan. In October 2012, Chonghaejin Marine Co. purchased the ferry and remodeled it to increase its capacity to hold 921 people.
Measuring 145 meters long and 22 meters wide, the Sewol was among the largest cruisers in Korea. It could carry up to 130 sedans, 60 5-ton trucks and 200 shipping containers at the same time.
It operated on the Incheon-Jejudo Island route since March after it was underwent an inspection by the Korean Register of Shipping in February.
Chonghaejin Marine has changed the number of passengers in the sunken ferry several times. On Wednesday when the accident occurred, the number of passengers changed from 477 to 459, then 462, and again to 475 throughout the day. Then, on Friday, the number was changed again to 476.
By Kim Yon-se (email@example.com)