Estado de la cuestión

A shipbuilding contract should contain a provision for a refund guaran-tee. After contract signing and during construction, the shipowner will have been making progress payments. If the shipyard becomes insolvent or is declared bankrupt or otherwise defaults on the contract, the owner will want his or her progress payments returned. Th e usual procedure is for the shipyard to arrange with his or her bank to provide a refund guar-antee to the shipowner. It is important that the bank’s guarguar-antee be prop-erly worded and signed by an authorized bank offi cial. If the shipowner is fi nancing the ships, the lending agreement will contain a clause requiring that the shipbuilding contract have a refund guarantee and that proceeds from it are paid to the lender.

4.2 Conclusion

Because the fi nancing of ships involves massive investments it must be approached with care and caution. Th e world fi nancial condition and the economics of the maritime industry are constantly changing and create risks.

Th is is especially true because the term of the investment and the life of the asset are long and may be subject to one or more market cycles. Th e best fi nancing strategy in one period may not be the right solution in another. Th e rewards may be great but the risks are real. Th erefore, the shipowner-buyer should study all the fi nancing options, weigh the risk and avail him or herself of the best professional assistance available, especially investment bankers and maritime lawyers.

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© Th e Author(s) 2016 125

M.G. Kavussanos, I.D. Visvikis (eds.), Th e International Handbook of Shipping Finance, DOI 10.1057/978-1-137-46546-7_5

5

5.1 Introduction

When a lender advances money to a shipowner, the lender needs to ensure that it is adequately protected and secured against the insolvency of the bor-rower, its failure to perform its obligations on a timely basis and the loss, or attachment by other creditors, of the ship. Th e owner, whose fundamental objective is to increase the return on his or her investment, is, by contrast, seeking to limit the lender’s interference with its business and to maintain the greatest fl exibility in the conduct of its business and the operation of its ship.

In the current environment where there is limited bank liquidity and with banks under greater scrutiny and pressure from regulators (as well as from their own internal risk, compliance and anti-money-laundering depart-ments which are playing an increasingly prominent role within banks), debt fi nancing in shipping, which has always been considered to be capital-inten-sive and risky, is becoming more diffi cult to obtain. Th is applies in particular to owners who—as a result of the size of their fl eet or operations, the lack of corporate structure or the lack of transparency in the ultimate benefi cial ownership of their group—do not meet the minimum criteria required by

Debt Financing in Shipping

George   Paleokrassas

G. Paleokrassas ( )

Watson Farley & Williams , Building B, 348 Syngrou Avenue, Kallithea , Athens 17674 , Greece

many banks in order to become their customers. In an increasingly cau-tious climate, banks need to ensure that the loans they book do not con-travene any international or local laws or regulations concerning sanctions, tax avoidance and share ownership, and also that they will comply with the capital adequacy requirements to which they are subject. Th e underly-ing principle of the debt fi nancunderly-ing of ships is that a lender advances a debt facility and that the ship and other such collateral as the borrower provides secures the repayment of the facility through the ship’s earnings, backed by that security.