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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
Drawdown
loan taken from bank released in different stages payment for vessel made in stages, based on completion each loan payment disbursed
26
Loss payable clause
protect lender value of vessel drop below loan value, lender to top up difference
27
Balloon payment
for cash strapped borrower monthly installment reduced last few payment increased
28
Features of loan agreement
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
Loan security Methods
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
Assignment of earnings
* earning goes into a/c opened in bank * notice made to charterer to pay into account, still liable to perform obligation
31
Assignment of insurance
* bank assign insurance * comply with bank requirements * bank claim form insurance
32
Assignment of ship building contract. refundment
* Bank to approve modification or decision * refund paid to bank then ship owner
33
Share pledges
* Excercise security
34
Account pledges
open earning, retention, drydocking account
35
Statutory Mortgage
lender register loan with flag state
36
Where to get money
saving, private fund, pension fund, financial markets (banks, bonds, equities)
37
Private fund
own private resources private investment private loan
38
Corporate Bank loan
large shipping companies secoured against company balance sheet (profit & loss acc)
39
Ship yard credit
loan secured from bank interest subsidised by shipyard
40
Mortgage bank loan
term loan provided by nbank secured against mortgage of ship large loans syndicated
41
Mezzaine finance
15 % own fund + investors 15 % high interest rates (8-9%) 70% bank interest (major financing) SIBOR+ Margin
42
Capital Markets
Stocks Bonds Special Purpose vehicles Leasing companies
43
Stocks
not common for shipping companies IPO Prospectus describing company, financial performance, market offer shares in stock exchange Maersk
44
Bonds
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
Special purpose vehicles
isolate risk buy ship from bank loan & equity investors lease time charters vessel bought, appoint manager to run
46
Leasing Companies
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
Securitisation of shipping assets
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
Syndicated Loans
Loans from group of lenders to single borrower alleviate risk more cashflow if required
49
Vanilla loans
term loans fixed interest rates monthly, quarterly repayment schedules set maturity date
50
Back end/front end loans
debt to revenue (DRI) ratio calculate how much of ship revenue goes to mortgage ship expense/gross revenue
51
Revolving Credit Facility
Free cash withdrawn repaired any manner, any number of times until arrangement expire interest paid when money loan
52
Costs associated with ship financing loan
Interest and payment schedule Commitment Fee Management
53
Interest and payment schedule
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
Commitment fee
standby period or extensive drawdown period 0.5% per anum on unused portion of commitment
55
Management fee
1% front end payment administrative, processing, syndication cost
56
Captial adequacy ratio
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
Capital Financing
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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