Page 30: of Maritime Reporter Magazine (March 1998)

LEGAL UPDATE

The Revitalized U.S. Title XI Financing Guarantee Program Available To The Energy Industry by Art Dimopoulos, contributor

The offshore oil industry is no stranger to Title XI financing.

During the height of the offshore and onshore construction boom in the late 1970s and early 1980s, over $8.1 billion in approved Title

XI transactions were in force cov- ering hundreds of ships, barges, lighters, tugs, supply boats and mobile offshore drilling units.

The building fervor came to a screeching halt in the mid-1980s when the market collapsed.

Private lending institutions and the Maritime Administration's (MarAd) Title XI program experi- enced extensive defaults. In the late 1980s and early 1990s there was a lull in Title XI financing with very few transactions. As of 1992, no new Title XI applications were approved, and the total amount of Title XI guarantees out- standing had dropped to approxi- mately $2.3 billion.

With the changing of the world's geopolitical face, emerging markets fueled new opportunities.

The world's fleet aged and the need to supply energy, raw materi- als and goods produced new demand. On November 30, 1993, the National Shipbuilding and

Shipyard Conversion Act of 1993 was enacted. This expanded the

Title XI program to include vessels built in the U.S. for foreign owner- ship and flag and authorized Title

XI guarantees for shipyard mod- ernization and improvement.

From 1994 to the present, Title

XI projects have totaled in excess of $2.7 billion. Projects have included a self-elevating mobile offshore drilling unit for the

Rowan Companies costing $174.9 million of which $153.1 million or 87.5 percent was financed through

Title XI; and a recent $110.7 mil- lion semi-submersible mobile off- shore drilling unit for Noble

Drilling Corporation of which $96.8 million was financed by

Title XI.

Approved Title XI transactions have covered a wide array of ves- sels including: anchor handling/supply vessels, articulat- ed tug and barge units, double skin tank barges, tractor tugs, lift boats, double hull product tankers and chemical carriers.

The resurgence of the offshore industry and an increased thirst for energy demand - especially in

Asia - have resulted in a revital- ized industry, which is reflected in the Title XI orderbook. As a result of increased offshore oil rig utiliza- tion and increased rates, new rig construction is once again under consideration. Despite the current lull brought on by the crisis in

Asia, the long-term forecast is for continued growth and demand.

Vessel Eligibility

The types of vessels eligible for

Title XI guarantees include pas- senger, cargo and combination passenger-cargo carrying vessels, tankers, towboats, barges (includ- ing offshore drilling units) and dredges.

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