Shipping Finance

Before studying shipping in depth as an industry, it is wise to consider the means by which it is financed. This sector of our industry is increasingly complicated and now requires an entirely separate course for its clearer understanding.

Course content (15 Lessons)

Lesson  Topics

  • Introductions — Brief characteristics of the industry — cyclical nature — gearing — the equity consideration — lack of controls — demand/supply balance — risk versus reward and its continued assessment — credit crisis — restrictions on lending
  • Types of Finance — Facility types — fixed, floating, term, revolving credit, guarantees, letters of credit etc — recourse versus non-recourse lending — asset based lending versus balance sheet lending — secured versus unsecured lending — corporate versus entrepreneur risk — country versus company risk
  • Forms of Finance — Debt provision — syndicated, bilateral, club and Eurocurrency transactions — equity — mezzanine/bridging finance — private placements
  • Finance for New Construction — General approach to newbuilding lending — OECD related schemes — KEXIM etc — Danish bond schemes — Government shipbuilding subsidies — ECGD and SMFC support
  • Finance for Second-Hand Acquisitions — equity contribution versus debt provision — types of security (FPMs etc) — residual risk — age profile — insurance considerations — periods of exposure — vessel types
  • Other Sources of Finance — these concentrate on the specific characteristics of the various methods of raising finance — eg leasing — sale and charterback — bareboat charter arrangements — off balance sheet techniques etc
  • Borrowing Structures — the single shipowning company — multinational conglomerates — other limited liability companies — flags of convenience
  • Security and Protection — required by Lenders/Investors — types of vessels — covenant structure — security mechanisms — valuation techniques — other forms of recourse — articulating asset risk
  • Vessel Profitability — Cashflow — methods of employment — pool arrangements and liner/conference revenues — working capital adequacy — other forms of cashflow support
  • Credit Analysis — Assessing management scope and competence — profit and loss analysis — balance sheet analysis — covenant and ratio controls — industry and trading conditions
  • Documentation — commitment letter — loan agreement — security documents, mechanisms and provisions
  • Interest Rate Management — fixed and variable rate borrowings — foreign currency exposure — swaps, options, FRNS etc derivative debt instrument /M&A — mortgaged back securities
  • Taxation and Depreciation — creating tax losses — capital allowances — tax breaks for offshore registers
  • Workouts — nature and timing of problem — decision to foreclose, scrap or continue trading — multiple lending — renegotiation of terms and conditions
  • Summary — lenders' responsibilities — environmental considerations — capital structures — economic factors — demand and supply balance — increase in financial sophistication

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