Financial

  • It isn’t always about the rate.

    In a robust boatbuilding market – like the one we see now – even the most successful, financially stable operators need to borrow. And, if that newbuild or conversion program involves a significant fleet expansion, then everyone will need to leverage their business model. So, you’ve assembled and sent off your financial package to a handful of lenders, answered most of their questions and now have a number of their proposals or term sheets in front of you.
    While the proposals are generally similar, some are not, especially from non-commercial marine lenders and may contain arcane language or confusing structure. Evaluating one proposal over another to determine suitability and competitiveness is a key to securing the best financing or leasing facility for your company. The formats of most proposals generally follow a certain format. Sure, the rate offered is important, but ultimately, understanding the nomenclature is the key to selecting the right option for you and your growing operation.

    Garden Variety Proposals 
    Construction Loan Proposal: The potential lender will specify the rate and term of the loan; name corporate and/or personal guarantors; describe the asset(s), including vessel specs, cost, propulsion system and major equipment; shipbuilder information; progress payment or milestone schedule; repayment scheme; assignment of construction contract; insurance requirements; capitalized or periodic interest payments; advance against cost; value of owner-supplied equipment or additional collateral; either floating or fixed interest rate and to what it is indexed; break funding penalty if any.  Expect a “material adverse change” (MAC) clause in the general terms of the loan. A MAC clause is the lender’s escape language which requires the borrower to repay all loan amounts advanced in the event of a major decline in the financial health of the obligor’s business.
    Term Loan Proposal:  A term loan usually follows the termination of the construction loan (if there is any). The potential lender describes the collateral, lists any additional collateral to be pledged; describes the method for release of additional collateral; names guarantors; specifies loan amount and down payment. The lender will propose the term of the loan; the interest rate, corresponding index and the amortization period. Various repayment terms may be offered including seasonal payments; non-standard payment intervals; balloon payments; delayed principal payments or other, sometimes highly creative payment plans. Additional language may include prepayment penalties, survey requirements, fees and other costs to be incurred by the borrower.  Insurance requirements vary and are dictated by the vessel’s usage characteristics. Expect higher limits to be required for vessels that transport petroleum or other noxious liquid or dry cargos.
    Bareboat Charter or Lease Proposal: What is in effect a proposal to offer terms and conditions to rent a vessel for a specified period of time, a lease will vary from a loan proposal in a number of important ways. There are two major flavors of a lease, operating and capital. If:

    • Title automatically passes to the lessee at the termination of the lease
    • The lessee may purchase the vessel at less than fair market value
    • The term of the lease is greater than 75% of the vessel’s useful life
    • The present value of lease payments are less than 90% of fair market value


    Then: the lease is a capital lease which is, in effect, a financing agreement. The lessee claims depreciation and interest on the vessel, the lessor shows the interest charged as income. If it is not a capital lease, it is an operating lease and depreciation and the cost of borrowing to finance the vessel is claimed by the lessor. The lessee can claim rent paid to the lessor as a deduction on his/her taxes.
    Expect a lease proposal to specify the type and terms of the lease that is being offered. Information should include:  the length of the lease (the term or tenor); payments in advance or arrears; the monthly or other interval between payments; the payment amount specified as a dollar amount or lease rental factor; insurance requirements; a possible early buyout option (EBO) wherein a fixed price at a specified date is offered for the purchase of the vessel; and termination options at the end of the lease. These options may include a return to lessor provision, an opportunity to purchase the vessel or the option to re-lease the vessel for an additional term. The lessor will disclose the index used to determine the rate, but usually will not offer either the actual rate being charged or the residual value set by the shipowner of the asset at termination.

    Evaluating the Proposal
    Most loan proposals can be evaluated simply by comparing advance, interest rate, term, points or fees paid by the obligor. Others may have included requirements that specify when and how much it would cost to pay off or terminate the loan. Still others may require that certain covenants for debt and interest service coverage or liquidity ratios be met and maintained. Prohibitions on secondary mortgages, assignment of equity or limitations of distributions to shareholders are other possible covenants. Violations or breaches of these covenants may result in a default and the lender “calling” or accelerating payment of all future payments or increasing the pricing of the loan. No covenants are the best covenants.
    Comparisons of leases or Bareboat Charters are not quite as simple, although the basics are the same.  There is inherent risk incorporated to most operating leases which generally occur at the termination of the lease.  Leases are available in a number of different “flavors.”  Some carry more risk and some carry less ... most risk lies in the value of the vessel at the end of the lease. In a fair market value termination, the vessel can be purchased at the then current fair market value (FMV) as determined by an independent surveyor. Further, the option to re-lease the vessel for additional periods may be based in part on payment history of the lessee and the then current index.  What may be available to the lessee to mitigate some of the FMV risk in a operating lease or bareboat charter is the EBO.  Given that if the lessor’s profit (Internal Rate of Return or IRR) on the vessel’s lease remains the same, then  the greater the amount of the EBO, the lower the amount of the rent . . . and vice versa. The EBO must meet the Internal Revenue Service’s “compulsion test.”  The purchase price of the collateral cannot be less than the present value of the remaining rents plus a FMV worth not less than 20% of assumed value. The lender’s rate of return of the lease and the EBO are generally the same. It is this value of this IRR which, in addition to the rent and amount of the EBO that is used for comparison between one proposal and another.
    As the actual calculation of the internal rate of return at the EBO is arcane at best, contact your CPA or financial analyst for their professional expertise in performing such calculations and shrink the mountain of proposals to the one that suits your business best. And, remember, it isn’t always just about the rate.


    (As published in the November 2014 edition of Marine News - http://magazines.marinelink.com/Magazines/MaritimeNews)

     

  • collateral value, there is inherently less risk on the lender’s behalf. Consequently, an ABL loan may carry a lower rate and be more forgiving of the financial condition of the borrower.  However, an ABL lender observes the borrower’s financial condition with more scrutiny, carefully monitoring receivables

  • Financing the Municipal, Tax-Exempt Workboat Sector. Poring over any of the many marine publications that seemingly arrive daily in your mailbox or inbox, you can get an idea of the depth and breadth of the current state of U.S. commercial marine vessel shipbuilding. Given the tumult in the oil market and

  • Financial reporting is a sobering issue. Creative accounting, “cooking the books,” earnings manipulations and other accounting shenanigans have been around as long as folks have had income, paid bills, taxes or sought investors for their ventures. With intent to defraud for economic gain and financial crimes

  • J.D. Geary, president of Midland Enterprises Inc., 1400 580 Building, Cincinnati, Ohio 45201, has announced the election of three corporate officers by the Midland board of directors. John M. Keelin has been elected controller, William J. Mayer assistant vice president of finance, and Thomas J.

  • operations in ocean shipping and other major United States industries for more than a decade, has been elected executive vice president and chief financial officer for Northeast Marine Terminal Company, Inc. The action by the board of directors was reported by F.X. Mc- Quade, president of the Brooklyn

  • Why the wild ride for company valuations? The financial crisis and global recession that began in 2008 had a major impact on almost every major world industry. Its effects can be examined by analyzing historical data and trends for the highly cyclical maritime industry, including both public company

  • budgeted for those gallons.” Savings, in this case, were considerable. Fuel used by WSF isn’t hedged in the futures market now. “We’re working to get financial hedging contracts in place,” WSF spokeswoman Joy Goldenberg said. Lamson said The Steamship Authority will have another ULSD-fueled ferry built soon

  • On September 26, 1986, the Financial Times will publish a fourpage survey on International Ports. The survey will look at the rapid pace of innovation the ports have had to maintain to meet growing demands, and will consider recent major investment in fast and efficient ways of handling cargo

  • companies, the shares of which are being transferred to a trustee. The suspension payment was imposed in February 1983 because of serious financial difficulties of the RSV holding company. Verolme Botlek is a sound company and as such the suspension of payments was not necessary; however

  • and there are fewer good choices for finance sources, but there are still good choices for finance sources. As someone with more than 20 years providing financial solutions to the maritime industry, I know this to be true.   If we’re being honest, this industry can be a scary place not just for those who

  • James (Jay) A. Harkness was appointed Vice President and Chief Financial Officer of Rigdon Marine. Harkness is responsible for the financial management of the company, including fiscal controls, insurance placement and claims management and financial reporting. "Jay is a very capable individual

  • MR Apr-23#8 6,443 Doun Kisen 109 5,627 Financial Products Group 71 4)
    April 2023 - Maritime Reporter and Engineering News page: 8

    # Vessels Vaule ($) NYK Line 216 15,443 MOL 186 14,460 Shoei Kisen 156 8,972 Nissen Kaiun 170 7,773 K Line 108 6,443 Doun Kisen 109 5,627 Financial Products Group 71 4,387 Nisshin Shipping 101 3,084 Meiji Shipping 37 1,799 Santoku Senpaku 64 1,954 Japanese Owned Fleet Type # of Vessels

  • MR Feb-23#8 Lloyd 108 7,617 BoComm Financial 96 6,867 OOCL 75 6)
    February 2023 - Maritime Reporter and Engineering News page: 8

    15,035 Moller Maersk 265 14,834 Seaspan Corp 181 13,249 COSCO Shipping Lines 198 11,115 Evergreen Marine 159 9,994 Hapag Lloyd 108 7,617 BoComm Financial 96 6,867 OOCL 75 6,475 Shoei Kisen 71 5,691 Grand Total 1,818 108,099 8 Maritime Reporter & Engineering News • February 2023 MR #2 (1-17).indd

  • MR Dec-22#8 Leasing 360 20,811 ICBC Financial 256 17,424 COSCO Shipping)
    December 2022 - Maritime Reporter and Engineering News page: 8

    largely continue in mainland China, the numbers speak for themselves. Top 10 Owners Company # of VesselsTotal Value ($) BoComm Leasing 360 20,811 ICBC Financial 256 17,424 COSCO Shipping 199 13,134 CMB Financial 229 10,847 CDB Leasing 244 8,258 COSCO Shipping 141 5,834 Minsheng Financial146 5,199 COSCO Shipping

  • MR Nov-22#8 7,302 Doun Kisen 105 6,520 Financial Products 68 5,462 Group Niss)
    November 2022 - Maritime Reporter and Engineering News page: 8

    # of VesselsTotal Value ($) NYK Line 284 25,379 MOL 231 21,863 Shoei Kisen 180 13,306 Nissen Kaiun 176 8,996 K Line 114 7,302 Doun Kisen 105 6,520 Financial Products 68 5,462 Group Nisshin Shipping 135 4,132 Meiji Shipping 43 2,841 Santoku Senpaku 63 1,934 Japanese 2nd Hand Purchases Sale Date #

  • MR Sep-22#8 136 5,152 ICBC Financial Leasing 95 4,979 AET)
    September 2022 - Maritime Reporter and Engineering News page: 8

    182 208 Grand Total 14,207 292,000 Top 10 Owners Company # of Vessels Total Value ($) COSCO Shipping Energy Transportation 136 5,152 ICBC Financial Leasing 95 4,979 AET 57 4,704 Bank of Communications Financial Leasing 110 4,689 Euronav 65 4,243 Maran Tankers 57 4,138 Frontline Ltd 58

  • MT Jan-22#57 training courses and Financial Of? cer of The Great)
    January 2022 - Marine Technology Reporter page: 57

    create and deliver the Marine PMI. Centa was most recently the Chief early 2024. The multi-year survey adds Data Management training courses and Financial Of? cer of The Great Lakes a second azimuth over CGG’s existing free annual workshops. He leaves Ocean- Brewing Co. in Cleveland, Ohio. Northern

  • MR Jan-22#54 Heere- & Operations; Chief Financial Of? cer Paul to the)
    January 2022 - Maritime Reporter and Engineering News page: 54

    lled various (management) Lindström, now heads up Technology Maine Maritime Royal IHC Hempel roles, including manager of the Heere- & Operations; Chief Financial Of? cer Paul to the Helm @ Maine Maritime ma shipyard in Vlissingen. After being and Executive Vice President, Lars HII Britannia P&I Royal IHC

  • MR Dec-21#41 53 16,373,200 $3.06 ICBC Financial Leasing 72 6,143,100)
    December 2021 - Maritime Reporter and Engineering News page: 41

    121 9,483,100 $4.10 AET 63 10,481,800 $3.94 Euronav 67 16,682,100 $3.45 Maran Tankers 58 15,542,800 $3.39 China VLCC 53 16,373,200 $3.06 ICBC Financial Leasing 72 6,143,100 $3.00 Frontline Ltd 56 10,295,900 $2.68 Sinokor 61 6,273,400 $2.63 Bahri 57 13,895,290 $2.54 Top Tanker Owner Countries

  • MR Nov-21#8 ($B) Bank of Communications Financial Leasing 339 $24.76 COSCO)
    November 2021 - Maritime Reporter and Engineering News page: 8

    the statistics driving China’s maritime market. Top Chinese Ship Owners Owner Vessels (Live Total Value & on Order ($B) Bank of Communications Financial Leasing 339 $24.76 COSCO Shipping Lines Co 195 $21.47 ICBC Financial Leasing 191 $11.39 CMB Financial Leasing 169 $9.93 China Development Bank 186

  • MN Nov-21#51 travel much further. nia Financial Development Corporation)
    November 2021 - Marine News page: 51

    up by a battery bank or diesel tank, you can have Economic Development Bank and the Northern Califor- much more hydrogen and travel much further. nia Financial Development Corporation (NorCal FDC), “It’s also modular and scalable, with a number of fuel the Climate Tech Finance team led a technology quali

  • MR Feb-21#29 , and its Chief Financial Of? cer noted that)
    February 2021 - Maritime Reporter and Engineering News page: 29

    said average monthly cash burn rate for Q4 2020 was $500 million, and the Q1 2021 number 2021 to be approximately $600 million/month, and its Chief Financial Of? cer noted that, with $9.5 billion in cash at end 2020, “we… have the liquidity in place to sustain our- selves throughout 2021, even in a zero-reven

  • MR Jan-21#57 Kate Sherrard into its Financial tive January 1. Diamond)
    January 2021 - Maritime Reporter and Engineering News page: 57

    and ship- will assume the duties of Executive ping capabilities with the addition of Director and General Counsel effec- partner Kate Sherrard into its Financial tive January 1. Diamond succeeds Paul Services Practice. She joins the ? rm Kirchner, who has been APA Executive from Clifford Chance where

  • MN Jan-21#22 time that we had a staff. Financial relief: PVA advocacy)
    January 2021 - Marine News page: 22

    to receive ? rst-round PPP funds and used up all of it on the seasonal employees we had on the payroll for the short time that we had a staff. Financial relief: PVA advocacy efforts pay off PVA has always been the voice of the passenger vessel This additional funding throws a lifeline to our company

  • MN Aug-20#71 are rated A+ (Supe- rior), Financial Size Category XV by)
    August 2020 - Marine News page: 71

    is underwritten by Berkley Off- shore Underwriting Managers, a member company of Berk- ley, whose member insurance companies are rated A+ (Supe- rior), Financial Size Category XV by A.M. Best Company. With the new Marine License Insurance Program from 360 Coverage Pros, professional mariners can put afford-

  • MR Jun-20#43 dollar assets have become financial li- into the year, the)
    June 2020 - Maritime Reporter and Engineering News page: 43

    can be seen as a start of the year. positive. With a large number of cruise ships on order leading Some of these billion dollar assets have become financial li- into the year, the caution here is to ensure the market is not abilities with several high priced vessels are laid up and out of oversupplied

  • MR May-20#57 Hemmen become the new Chief Financial Offcer & Dolan, Inc)
    May 2020 - Maritime Reporter and Engineering News page: 57

    New CFO at Hamburg Süd james “jim” kline, USCG (Ret)., has lasse carøe henningsen, 46, will joined Martin, Ottaway, van Hemmen become the new Chief Financial Offcer & Dolan, Inc. as an engineering and (CFO) at Hamburg Süd, succeeding ja- surveying consultant. kob Wegge-larsen, who has held this Mund

  • MR May-20#43 OFFSHORE WIND navirus-caused financial disruptions may put)
    May 2020 - Maritime Reporter and Engineering News page: 43

    OFFSHORE WIND navirus-caused financial disruptions may put private equity and lina, which will initially serve a small project offshore Virginia, other non-traditional funding sources under new pressures. and the second at Senesco, which will serve Revolution Wind, Synergies on the supply chain front

  • MR May-20#42 into a partnership with the financial packager Mid- into wind)
    May 2020 - Maritime Reporter and Engineering News page: 42

    is looking at the U.S. market. Importantly, tune, Viking Poseidon and Acergy Viking have been chartered it entered into a partnership with the financial packager Mid- into wind energy projects in the North Sea for deep pocketed ocean Wind (tied to the Clean Marine group mentioned previ- developers

  • MR May-20#41 , may provide a template for financial structures that could)
    May 2020 - Maritime Reporter and Engineering News page: 41

    part of the energy sphere, LNG fueling for ves- dormant oil platforms and drilling rigs. To date, available lift- sels, may provide a template for financial structures that could ing and installation vessels are non-Jones Act compliant. emerge, with vessel ownership tied to a mix of project fi- On the

  • MR Apr-20#55 VETUS since Wenker as Chief Financial Offcer Desig- 2009,)
    April 2020 - Maritime Reporter and Engineering News page: 55

    Trust Appoints Wenker System Business Director of YMI. As FSL Trust Management appointed Markus the Managing Director of VETUS since Wenker as Chief Financial Offcer Desig- 2009, he will retain this position and will nate of FSLTM. Wenker will take over the also oversee management of additional role

  • MR Apr-20#46 navigating the financial challenges of The investment)
    April 2020 - Maritime Reporter and Engineering News page: 46

    , making it an ideal solution for For Mr. Walaunet and Island Offshore, tion and a helideck.” maintenance on unmanned installations navigating the financial challenges of The investment has delivered an impres- – the number of which is growing in the recent years and the environmental chal- sive track

  • MR Apr-20#44 when they environmental and financial efficien- identify and)
    April 2020 - Maritime Reporter and Engineering News page: 44

    configuration of vessels has all provided he explains. “This gives us the ability to right capabilities for our clients when they environmental and financial efficien- identify and drive new opportunities with are needed.” cies. We’re now investing in and deploy- concepts that bring something new to

  • MR Mar-20#47 ;sourou-|;7lbmbv|u-|ouv been financial, emission reduction)
    March 2020 - Maritime Reporter and Engineering News page: 47

    “This has been an incredible journey, with a return that has m|;um-?om-?!;]bv|ub;vkm1l bm-L?b-?om?b|_|_;-uv_-??v?-m7v-ub?l;sourou-|;7lbmbv|u-|ouv been financial, emission reduction, and reliability. It has been amazing.” www.marinelink.com 47 MR #3 (34-49).indd 47 3/6/2020 2:24:54 P

  • MR Feb-20#69 Bibow was named Group Chief Financial Of? cer (CFO). ONE)
    February 2020 - Maritime Reporter and Engineering News page: 69

    , home to Liebherr USA, Co. Managing Director, as the new group Chief Information Of? cer (CIO). In addition, Soeren Bibow was named Group Chief Financial Of? cer (CFO). ONE SEA Appoints Lehtovaara ONE SEA appointed Capt Eero Lehtovaara as its new Chairman. Lehtovaara, a Master Mariner and As- sociate