Ship Finance

Ship finance encompasses range of methods by which fund is made commercially available for purchase and/or operation of the vessel and there are endless variations as to how this is done. Ordinarily, and for obvious reasons, leveraging equity through increased level of debt is unsurprisingly deemed as a good thing at the expense of increasing risks to lenders. There are less and less willing banks and finance houses financing ship owning projects in traditional way and more and more resorting to following financing alternatives;

  • Debt finance with an equity kicker, so that in addition to receiving repayments towards principal and interest, the financier providing the loan, will get to share the gains but not losses that is realized by the owners.
  • Lease finance, where the financier (lessor) buys and owns the ship and then lease it back to the lessee at a rate corresponding to the income if the lessor has financed the investment/purchase, lease may be structured as “finance deal” or “operating lease”.
  • Subordinated debt finance. This comes in two different forms, one is where the subordinated debt is provided by a third-party lender (mezzanine finance) and the other where owners contributes bulk of its investment as debt rather than equity and agrees that this debt is only repaid after the debt provided by outside financier has been repaid.

Notwithstanding the above options, market has evolved and with that the ways in which ships are financed, and the change has been seemingly considerable. Ship finance landscape shows a dwindling number of traditional banks which used to offer ship financing deals, financing debts from 60% of value and working capital to a phenomenal 110% at the height of shipping boom, and emergence of alternative financing sources such as high yield bonds, preferred equity structures, etc.

AWS services cover all types of asset finance, shipbuilding and repair contracts, leasing and sale and purchase of the vessels and yachts.

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