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Ship Financing > EST > Flashcards

EST Flashcards

1
Q

Features of ship building contract

A epilator

A

Act of God/ Force Majeure: Permissable delays clearly stipulated
Equipment: Buyer can supply own equipment but installation by builder
Possesssion: requiremnt of buyer taking possession of vesel clearly specified
Inspection, Test trials: buyer can inspect and test equipment on vessel during buidling
Governing law/dispute resolution: law, note reference to expert advice
Approval : approval requirement mentioned in newbuilding contracts
Termination: Circumstance that both parties can terminate the agreement
Other events: error, neglect of omission by other parties not accepted
Registration: buyer responsible for registration of vessel

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2
Q

Demolition Contract Clause

brewedp

A

Permanent Ballast: Stone or concrete, permanently kept on board, correct a list developed during building, no value, subtracted from ldt when selling scrap
Dispute resolution clause
Environment & safety practices in ship demolition and recycling to follow IMO guidelines
Buyer allowed to put watchmen on board at delivery place
Exemtioon for liability for loss of vessel before delivery mentioned
Buyer & Seller default remedy mentioned
Purpose of sale is for demolition mentioned

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3
Q

Materials for scrap

A

scrap steel- 85%
Cast iron- 5%
non ferrous material - 2%
non combustible fittings like furniture -8 %

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4
Q

Letter of credit

A

prevent fraud as buyer do not pay after delivery
payment arranged through letter of credit
seller deliver at designated point
proof of delivery through various financial documents

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5
Q

Reason for scrap

CARDS

A

Company policy to renew aged fleet
Age of vessel
Flag state requirement for registry
Obsolete design
not seaworthy

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6
Q

Caveat Venditor

A

seller beware

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7
Q

Freely transferable

A

no encumbrace and blacklist
seaworthy

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8
Q

Comparison of vessel calculation

A

Pro rate by size
Age= 5%
speed=2%

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9
Q

Precautions in valuation

A

assumed to be seaworthy, class maintained, freely transferable, no damage
no physical examination of ship (valuation based on class records and other documents)
no responsibility of accuracy of report (valuation figure not statement of fact)
matter of opinion

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10
Q

Methodology for valuation

A

Precautions (to list)
based on market comparison
compares ship type, size, speed, age
prices based on last sale, can go up or down
sources of data: vessel sold/for sale, volume of sale activity, market trends, day to day contacct worldwide for opinion

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11
Q

Type of valuation

A

Market valuation
past or present day value
demolition value
damaged value

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12
Q

Market valuation

A

most common
precuations (to list)
willing buyer and seller

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13
Q

Past or present day value

A

legal claim
bank financing

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14
Q

demolition value

A

lightweight and current demolition market price per lwt

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15
Q

damaged value

A

salvage claim
less repair, offhire cost during repair, towage, other expenses for sound trading conditions

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16
Q

Who need valuation

A

bank, lawyers, insurance underwriter, p&i club, average adjusters, ship owners, consortia investors

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17
Q

Assesment of risk

A

Initial discussion
Transaction structure
Credit assessment
Analysis of transaction

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18
Q

Initial discussion

A

send to managment
draft up facility

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19
Q

Transaction structure

A

loan amount, applicabiltty, interest rates, drawdown conditions, loan tenure, repayment, pre-payment, pricing cost, other conditions

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20
Q

Credit assessment

A
  • 6C : character capacity capital company conditions collateral
  • CAMPARI: character, ability, margin, purpose, amount, repayment, insurance
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21
Q

Analysis of transaction

A

Cash flow requirements
break even cost
secured/ unsecured
loan to value raio
balloning requrements

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22
Q

Specialist sector

A

Capital intensity
Volatile market
mobile assets (easy to change registry to FOC)
limited information (individual no transparency

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23
Q

Mortgage Interest Insurance

A

protect lender
insurer to pay lender outstnading loan amount even if waranty is breached

24
Q

Covenants

A

borrower agree when sigining loan agreement
1. no dispose of ship during loan
2. Insurance to be renewed
3. seaworthy vessel
4. Installment paid on schedule

25
Q

Drawdown

A

loan taken from bank released in different stages
payment for vessel made in stages, based on completion
each loan payment disbursed

26
Q

Loss payable clause

A

protect lender
value of vessel drop below loan value, lender to top up difference

27
Q

Balloon payment

A

for cash strapped borrower
monthly installment reduced
last few payment increased

28
Q

Features of loan agreement

A

Name of parties
amount and purpose
drawdown
interest periods, rate margins
repayment and prepayment
representation and warratnies
covenants
event of default
notice and transfer provisions

29
Q

Loan security Methods

A

Assignment of earnings
Assignment of insurance
Assignment of ship building contract. refundment
Loss payable clause
Mortgage interest insurance
Share pledges
Account pledges
Statutory Mortgage

30
Q

Assignment of earnings

A
  • earning goes into a/c opened in bank
  • notice made to charterer to pay into account, still liable to perform obligation
31
Q

Assignment of insurance

A
  • bank assign insurance
  • comply with bank requirements
  • bank claim form insurance
32
Q

Assignment of ship building contract. refundment

A
  • Bank to approve modification or decision
  • refund paid to bank then ship owner
33
Q

Share pledges

A
  • Excercise security
34
Q

Account pledges

A

open earning, retention, drydocking account

35
Q

Statutory Mortgage

A

lender register loan with flag state

36
Q

Where to get money

A

saving, private fund, pension fund, financial markets (banks, bonds, equities)

37
Q

Private fund

A

own private resources
private investment
private loan

38
Q

Corporate Bank loan

A

large shipping companies
secoured against company balance sheet (profit & loss acc)

39
Q

Ship yard credit

A

loan secured from bank
interest subsidised by shipyard

40
Q

Mortgage bank loan

A

term loan provided by nbank
secured against mortgage of ship
large loans syndicated

41
Q

Mezzaine finance

A

15 % own fund + investors
15 % high interest rates (8-9%)
70% bank interest (major financing)
SIBOR+ Margin

42
Q

Capital Markets

A

Stocks
Bonds
Special Purpose vehicles
Leasing companies

43
Q

Stocks

A

not common for shipping companies
IPO
Prospectus describing company, financial performance, market
offer shares in stock exchange
Maersk

44
Q

Bonds

A

Debt security (note)
insured to raise money
investor buy bond issured by shipping company
loan from investor, paid back on maturity
10 years
periodic payments twice a year
better than bank interest
short term

45
Q

Special purpose vehicles

A

isolate risk
buy ship from bank loan & equity investors
lease time charters vessel bought, appoint manager to run

46
Q

Leasing Companies

A

Ships sold to bank, large corporate, insurance company
leased back under agreement
ship operator operate, finance company depreciate ship against profit for tax benefit

Operating lease
short term
do not appear on balance sheet
container ship
end of lease revert back to leasor

Finance lease
long term
cover substantial part of ship life,
LNG, cruise
appear on balance sheet
lessor financer, lessee operating

47
Q

Securitisation of shipping assets

A

finance ship mortgage loans
1. Appoint investment bank
2. Bank set up SPC& trust
3. Board/back up servicer (lessee default) control trust
4. SPC issue bonds backed by assets to investors
5. Fund received use to buy mortgaged vessel
6. Vessel leased back to shipping company to operate

48
Q

Syndicated Loans

A

Loans from group of lenders to single borrower
alleviate risk
more cashflow if required

49
Q

Vanilla loans

A

term loans
fixed interest rates
monthly, quarterly repayment schedules
set maturity date

50
Q

Back end/front end loans

A

debt to revenue (DRI) ratio
calculate how much of ship revenue goes to mortgage
ship expense/gross revenue

51
Q

Revolving Credit Facility

A

Free cash
withdrawn repaired any manner, any number of times until arrangement expire
interest paid when money loan

52
Q

Costs associated with ship financing loan

A

Interest and payment schedule
Commitment Fee
Management

53
Q

Interest and payment schedule

A

equal installment over loan period
floating rate except
ship mortgage bank funded by issuing ship mortgage bonds
govt subsidised rate schemes funded by agreed spread by govt agencies

54
Q

Commitment fee

A

standby period or extensive drawdown period
0.5% per anum on unused portion of commitment

55
Q

Management fee

A

1% front end payment
administrative, processing, syndication cost

56
Q

Captial adequacy ratio

A

Capital to risk weighted ratio
measure of bank finance strength using capital and assets
protect depositors, promote stability & efficiency
high = safe, likely to meet financial obligation
bank capital/ risk weighted assets

57
Q

Capital Financing

A

methods to raise money for launch of business or cash reserve
selling ownership in company or taking debt
finance by equity debt or both
advantages and disadvantages

Ship Financing (1 decks)

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