The Shipbuilding Refund Guarantee Business And Its Risk Analysis

In 2008, the global financial crisis caused by the U.S. subprime mortgage collapse had a profound impact on national economies. After the shipping market bubble had burst, problems of poor management, excessive expansion of small and medium sized private shipyards appeared, the financial deterioration of many shipyards affected ship construction leading to late deliveries, poor quality, and an alarming spike in the abandonment of ships by their owners. As the shipyard's ship export agent, as well as the principal bank loan debtor, the trading company's new shipbuilding risks become increasingly evident, especially the risks of shipbuilding refund guarantee business should be paid more attention. Based on author's long term practice in the industry, this thesis studies the small and medium sized private shipyards' shipbuilding refund guarantee business with a deep analysis of all its associated risks.This thesis introduces the shipbuilding refund guarantee business, analyses its risk under the “Ship Owner – Trading Company – Small and Medium Sized Private Shipyard” mode that the trading company is facing: using qualitative analysis methods to analyze risks that are hard to quantify, such as market risk, operational risk, country risk, legal risk, reputation risk; and selects the KMV model to calculate and quantify the probability of the major risk in the refund guarantee business for the lender – the financial default of the small and medium sized private shipyard, in order to provide the specific figures for the trading companies' intuitive judgment, to effectively avoid the biggest risk under the shipbuilding refund guarantee. In this thesis, Zhejiang Donghai Shipbuilding Co., Ltd. and Zhejiang Hongrun Shipbuilding Co. Ltd. are taken to the empirical analysis, by using KMV model theory, to analyze the financial data between the sample shipyards and a similar sized listed shipbuilding company, to quantify the possibility and probability of those two shipyards' financial default risk. At last, we propose the countermeasures for the trading company, to minimize the risks of the refund guarantee business by taking controls during the Preproject stage, Project implementation stage and the Post-project stage.The research results of this thesis have practical value for the trading company against the small and medium sized private shipyards' shipbuilding refund guarantee risk. This study is also helpful to the shipping finance development.