The ‘Hidden Engine’ Behind the Homegrown Cruise Ferry: KOBC’s KRW 75 Billion Policy-Based Financing

95% Guarantee Provided for Senior Financing on USD 70.5 Million Vessel Price
Newbuild Realized Without High-Interest Subordinated Loans... Attracting Private Ship Finance
KOBC’s Second Special Support Program to Supply KRW 1.1 Trillion Over Five Years
Coverage Expanded to Include Mid-Sized Firms and Harbor Pilot & Towage Businesses

Exterior view of Panstar Miracle Cruise. Photo by Panstar Group

The first thing that caught my eye upon boarding the 22,000-ton Panstar Miracle, docked at the Busan Port International Passenger Terminal, was the long corridor leading to the cabins. The rooms were nothing like the cramped quarters typically found on passenger ships. The cabins were neatly outfitted with beds and bathrooms, and some even featured balconies offering unobstructed views of the sea.

A further look around the ship quickly dispels the traditional image of a passenger ferry. Outside, there are a swimming pool and a running track, while various relaxing spaces for passengers are found throughout the ship. The explanation that this is a "cruise ferry," combining the tourism and leisure functions of a cruise ship with the dual role of carrying passengers and cargo, made perfect sense. Since April last year, the Miracle has operated on the international route between Busan and Osaka, Japan.

The weather at sea was unfavorable at departure on the 6th. After leaving the port, rain fell and waves grew higher, causing the ship to sway considerably. However, despite the inclement weather, passengers spent time moving between cabins and onboard facilities, each enjoying their own activities. Even as rough waves rolled outside the windows, dining, relaxation, and leisure continued inside. This underscored the cruise ferry's distinctive ability to make the journey itself part of the travel experience.

There is another reason that makes this vessel special. The Panstar Miracle is the first cruise ferry constructed at a domestic shipyard. In Korea, it had been standard practice to operate secondhand passenger vessels imported from overseas on coastal and international routes. Given the enormous funding required to build a new ship, financial barriers often made it difficult for small and medium-sized shipping companies to order brand-new vessels. To date, the Miracle remains the only cruise ferry constructed at a domestic shipyard.

The total price of the Miracle also reached 70.5 million dollars. Although Panstar Group signed a construction contract with Daesun Shipbuilding in July 2022, securing financing was an issue. As the first cruise ferry of its kind in Korea, there was no precedent for similar ship financing, and launching a large-scale newbuild project requiring approximately 70 million dollars was not easy to accomplish with private funding alone. The vessel was ultimately able to take to the sea thanks to policy-based financing provided by the Korea Ocean Business Corporation (KOBC).

VIP Lounge of Panstar Miracle Cruise. Provided by Panstar Group.

Fueled by Policy-Based Financing, ‘Homegrown Cruise Ferry’ Takes Off… Expanding Newbuild Options for Smaller Companies

KOBC provided a debt guarantee for Panstar’s senior financing by utilizing its “Special Support Program for Small and Medium Shipping Companies,” introduced in 2022. Of the 70.5 million dollar construction price, Panstar covered 20% (14.1 million dollars) from its own funds, while the remaining 80% (56.4 million dollars) was sourced from financial institutions. KOBC guaranteed up to 53.58 million dollars, or about 95% of the senior financing — roughly KRW 75 billion.

This guarantee served as a priming mechanism to attract private capital. Banks such as Korea Development Bank, Hana Bank, and Busan Bank participated in the ship financing, allowing Panstar to secure newbuild funds by injecting only 20% equity without resorting to additional high-interest subordinated loans. A Panstar Group official commented, “Thanks to KOBC’s guarantee, we were able to secure financing through private banks. Policy-based financial support was instrumental in pushing the construction of this new vessel forward.”

Ship financing refers to loans that shipping companies use to build new ships or purchase secondhand vessels. Because ships are very expensive, shipping companies typically borrow most of the funds using the ship itself as collateral, since purchasing entirely with their own equity is difficult. The main issue lies with small and medium-sized operators with less capital and lower credit ratings. According to KOBC, even when business prospects are good, these companies often struggle to access private financing simply because they are small.

KOBC established the special support program in 2022 precisely to address these financial blind spots. Since its establishment in 2018, KOBC has expanded its support beyond ship finance and by 2024 had widened its business to include ports and logistics. By the end of 2025, it had provided a total of 15.4 trillion won in financing to 145 companies and 1,548 ships.

Of this, 9,146 billion won in ship finance was extended to 28 companies for 65 ships within the small and medium-sized sector. The amount provided through the first round of the special support program amounted to 388.7 billion won. KOBC reports that, compared to the same period before the special program launched in 2022, both the funding volume for smaller shipping lines and the number of supported vessels increased by 2 times and 1.4 times, respectively.

Busan Port as seen from Panstar Cruise on the 6th. Photo by Nahoom Kang

High Financial Barriers for Small Operators... 1.1 Trillion Won in Support over Five Years

KOBC plans to overhaul the special support program this year and launch a second round, aiming to supply 1.1 trillion won in ship finance over the next five years. This is not pre-allocated subsidy funding, but a medium- to long-term target determined by reviews of individual projects. The new round will more than double the size of support compared to the first program, adding pilot boat and towage businesses to the coverage. The door will also open to newly emerging mid-sized operators who exceed the standard for small companies, as well as those affected by geopolitical crises.

Financial terms will also be eased. Beyond investment and guarantees for ship introduction, KOBC will provide an annual interest subsidy of 2% for working capital loans, and — if a company receives a ship-mortgage loan directly from a bank without setting up a complex special purpose company (SPC) — KOBC will issue a guarantee for up to 15 billion won per ship. If multiple companies make a joint ship order, additional interest rate concessions will be provided, and non-financial support such as business feasibility reviews, external accounting audits, and financial/public relations consulting will be expanded.

There are concerns that expanding eligibility might reduce support for incumbent smaller operators. If a few larger, mid-tier companies receive concentrated financing, even a 1.1 trillion won program might result in reduced assistance for truly small or marginal operators.

KOBC, however, notes that the actual number of qualifying new mid-sized shipping companies is small, so encroachment on support for existing small operators is unlikely. A ceiling of 40 billion won per vessel applies to support under the special program, and currently, the pool of new mid-sized eligible companies remains in the single digits. A KOBC official explained, “We have expanded the program so that we can support new mid-sized companies, while maintaining the volume and number of support cases for existing small operators as much as possible.”

Panstar Miracle Cruise onboard lobby. Photo by Panstar Group

In Japan, Shipping Companies, Shipyards, and Finance Are Bundled... South Korea Must Connect Shipping and Shipbuilding

Experts say that, to enable even wider access to newbuildings for small operators, it is important to go beyond individual financial products and create an integrated structure connecting shipping, shipbuilding, and financing. KOBC is closely studying Japan’s ship financing system and its “joint shipbuilding ownership model.”

In Japan, private banks — including major banks and regional lenders — participate in ship finance along with policy-based financiers such as the Japan Bank for International Cooperation (JBIC), Development Bank of Japan (DBJ), and Japan Railway Construction, Transport and Technology Agency (JRTT). According to KOBC, Japanese shipping companies, cargo owners, financial institutions, and shipyards are tightly connected at the local level, developing a system linking everything from ship orders and financing to stable cargo flows.

The JRTT’s joint shipbuilding ownership system is a standout example. In this model, small and micro-sized shipping companies with limited capital pay about 10-20% of the construction cost, JRTT funds a portion of the remainder, and the vessel is ordered jointly. JRTT monitors and inspects the entire construction process, and the completed vessel is co-owned in proportion to the funding share. Operators pay usage fees over 7-15 years or, in some cases, up to 20 years; after the sharing period, operators buy out JRTT’s share and gain full ownership. Since its inception in 1959, this model has produced over 4,000 jointly owned newbuildings.

In Korea, there is growing discussion about introducing similar models, especially as part of the modernization of coastal passenger ships. KOBC has previously studied proposals to implement Japan’s regime domestically. However, direct transplantation is difficult. Since JRTT has continuously operated at a loss since its establishment, two major challenges remain: securing the construction funds needed for new vessels, and determining who will bear these costs.

Kim Sungjin, Head of Ship Financing at KOBC, stated, “It’s a good model for supporting Korea’s small regional passenger and coastal cargo fleets,” but also emphasized, “The crucial issue is who will shoulder the cost of sourcing ship finance.”

The Panstar Miracle stands as a precedent showing that policy-based finance not only supports newbuild orders by small operators, but also provides business to domestic shipyards. KOBC plans to extend the financing model proven with the Miracle to a broader range of small and mid-sized companies, promoting new ship acquisitions and the opening of new routes.

Kim continued, “The Panstar Miracle is an example of how policy-based finance can help small shipping companies secure new vessels, while simultaneously leading to higher value-added shipbuilding for Korean shipyards. We will continue to expand customized financial support to help small and mid-sized operators secure new vessels and develop new routes, strengthening the competitiveness of Korea’s shipping industry and supporting the joint growth of the shipping and shipbuilding sectors.”

This content was produced with the assistance of AI translation services.