This is the must-read title for all bankers, lawyers, ship owners and everyone involved in ship finance for new ships, second-hand ships, converting or repairing a ship, or refinancing existing indebtedness secured on a ship.
"Euromoney's "Shipping Finance" is an indispensable, daily reference which greatly simplifies our day-to-day work load by providing all the necessary information for a multitude of tasks in a single volume." - Meike Maettig, Vice President, Ship Finance, Credit Suisse.
Shipping Finance, 3rd edition includes:
An up-to-date analysis of the shipping market including comparisons of the world fleet A complete analysis of ship mortgage terms, conditions and mortgagee's rights, including a full description of documentation, legislation and registration procedures across the main maritime jurisdictions organised by individual country - now including India and China Extensive discussion of the procedure and documentation for registering ships on a country-by-country basis with advice provided by local experts An in-depth and practical look at the role of insurance in shipping and ship financing including sample documentation and insurance covenants and notices and a full discussion of the issues facing the maritime insurance industry This edition features chapters on:
the financing of second-hand ships the financing newbuildings the assignment of insurances and earnings guarantees, indemnities, charges, debentures and other security relied upon by lenders the sale and purchase of second-hand ships the application of Islamic finance
"We are thrilled that Stephenson Harwood has updated this very useful resource book. The text is concisely written and provides a comprehensive review of all critical aspects of shipping finance. This is indeed a "must have" for all shipping finance practitioners." - Peter Allen, General Counsel, O.S.L. Shipping & Development, Inc.
"There is nothing you can say which would overstate the importance of this book in my eyes...There is no better book on ship finance. It was a perfect introduction to the several billion dollars' worth of facilities I looked after as an in-house lawyer with Teekay Shipping Corporation and I still refer to it now that I am on the commercial side." - Mark J. Kremin, Vice President of Gas Services, Teekay Shipping Corporation.
Table of Contents
Shipping Finance, 3rd edition Table of Contents
Author biographies List of abbreviations
1. Introduction Updated by Lucy French The international element Ship registration The different types of registry Bareboat charter registration The one-ship company
2. The financing of second-hand ships Updated by Mark Russell Types of lender Loan and guarantee facilities Multi-currency options The importance of the international element Loan agreement provisions of particular significance Execution Standard security in ship finance transactions Registration of security Equity Mezzanine finance Annex A: Sample legal opinion
3. The financing of newbuildings Updated by Jonathan Ward and Dora Kokota The financing options Government support – the OECD and the EU4 The SUECS Annex A: Promissory note Letter of commitment Letter of guarantee Annex B: Refund guarantee
4. The banker’s perspective Alan Brauner and Peter Illingworth The shipping market Assessing shipping risk Choice of finance for shipowners The term sheet and risk analysis Conclusion
5. Financial markets products Doug Garnsey Introduction Interest rate hedging products Currency hedging products Freight hedging products Tying in hedging products to a ship finance facility Accounting issues Conclusion
6. The US capital markets Gary Wolfe Initial public offering and NYSE or NASDAQ listing United States public offerings Foreign private issuers Exhibits and confidentiality Other issuers The offering and underwriting process Billions of Dollars on a Handshake Special procedure for foreign private issuers NASDAQ National Market System requirements Non-SEC offering Private offerings Regulation S and concurrent US private placements Regulation S and Rule 144A Conclusion
7. The ship mortgage Updated by Lucy French with international contributions Introduction Types of mortgage The basic rights required by a mortgagee Standard mortgage provisions Mortgages in the most important ship registration jurisdictions Bahamas Bermuda The People’s Republic of China Cyprus Greece Hong Kong India Isle of Man Liberia Malta Marshall Islands Norwegian International Ship Register Panama Singapore United Kingdom 8. The assignment of insurances and earnings Updated by Ian Mace Importance of the assignment to the lender What is normally assigned? English law requirements Statutory requirements The assignment of insurances Fleet cover Joint insurance The assignment of reinsurances The assignment of earnings Earnings and retention accounts Requisition compensation Registration Annex: Notice of assignment Loss payable clause Insurer’s letter of undertaking Mutual insurance association letter of undertaking
9. Other security Updated by Sheila Obhrai Introduction The guarantee and indemnity Security over bank accounts Share charges and pledges The debenture The second mortgage
10. The sale and purchase of second-hand ships Updated by David Brookes Introduction The memorandum of agreement (MOA) and delivery Standard forms of MOA Sale and purchase within the structure of the Norwegian Sale Form The standard documents
11. Registering the ship Updated by Lucy French with international contributions Bahamas Bermuda The People’s Republic of China Cyprus Greece Hong Kong India Isle of Man Liberia Malta Marshall Islands Norwegian International Ship Register Panama Singapore United Kingdom
12. The role of insurance in shipping and ship financing Graham Barnes Mandatory certificates Marine insurances as security for ship financing Insurance Covenants Checking assigned marine insurances Check lists Insurance renewals Underwriting security Insurance claims Marine mutual insurers and protection and indemnity Protection and indemnity – marine liability insurance Terms of protection and indemnity (P&I) cover Bankers’ insurances Insurance of other interests (lessors, shipowners and passive investors) Mortgage rights insurance Annex A: Useful websites Annex B: Origins, history and fundamental principles of insurance Fundamental principles of all insurance Annex C: Summary of status of Conventions as at 31 March 2006 Annex D: Insurance cost increases
13. An introduction to Islamic finance Arlene Dourish and Struan Robertson Some basics Interest (riba) Risk (maisir) Islamic financial instruments most commonly used for ship finance Market trends Detailed example structures The Ijara model (leasing arrangement) The Musharaka model (partnership financing) Shari’a compliance Law and jurisdiction Other legal issues arising when structuring Islamic finance products
Graham Barnes Graham Barnes is the founding Director of BankServe Insurance Services Ltd, Lloyds brokers, providing confidential insurance broking, claims recovery and insurance consultancy services to banks and financial institutions in respect of their ship, rig and aircraft financing operations. BankServe now acts for the majority of all shipping banks. Previously founder, Chairman and Managing Director of BankAssure Insurance Services Ltd when it operated as an autonomous company within Aon. Prior to that he was one of the founders and Managing Director of Bankscope Insurance Services Ltd which was eventually absorbed into BankAssure. Graham had the leading role in providing Certificates of Financial Responsibility under the US Oil Pollution Act 1990 and views the latest Athens Protocol 2002 as an even larger challenge for the International Group of Protection & Indemnity clubs.
Alan Brauner Alan Brauner was formally Head of Shipping for Midland Bank in London, which was merged into HSBC in the early 1990's. He retired from HSBC in early 1994 but has remained working within the shipping industry in one form or another. A career banker for 39 years he joined Chase Manhattan Bank, London in 1955 where he established the European Shipping Division twelve years later. He left Chase in 1981 to join Midland Bank. Following retirement Alan became a consultant to Sinclair Roche & Temperley, which merged with Stephenson Harwood in May 2002. In December 1993 he was appointed a Non-Executive Director of F T Everard & Sons Ltd, a long established UK shipping company operating 35 vessels in the dry and wet coastal trades.
David Brookes David Brookes is a senior assistant solicitor in the Banking and Asset Finance Department of Stephenson Harwood. He specialises in all forms of non-contentious shipping and has extensive experience in sale and purchase work and debt finance and leasing matters. He has previously spent three years in the Firm's Piraeus office. He is fluent in Norwegian.
Arlene Dourish Arlene Dourish joined Stephenson Harwood from Sinclair Roche and Temperley in 1995 and became a partner in 2000. She acts for banks, lending institutions and shipowners in a wide variety of ship finance transactions including structured finance and leasing. She has specialised more recently in projects involving Islamic finance, through the second Shari'a compliant shipping fund set up in 2004.
Lucy French Lucy French graduated in law from St Edmund Hall, Oxford in 1994, joined Stephenson Harwood the following year and was admitted as a solicitor in 1997. On qualification, she joined Stephenson Harwood's shipping department and has specialised since then in all aspects of ship finance work, including sale, purchase and registration of second hand vessels and the financing of both newbuildings and second hand vessels. She acts for both lenders and borrowers. Lucy became a partner in Stephenson Harwood's Banking and Asset Finance Department in 2005.
Douglas Garnsey Douglas Garnsey joined the Corporate Risk Solutions Shipping team within the Markets Division of The Royal Bank of Scotland plc in July 2001. He works within a team dedicated to providing risk management solutions to the bank's global shipping client base. He specifically advises the bank's shipping clients based in Greece and Asia with regards to interest rate risk management.
Peter Illingworth Peter Illingworth is General Manager and Head of Shipping in DVB Bank AG's London Branch. He joined DVB Bank in 1998. He started his career with ANZ Investment Bank in 1986 before moving to Kleinwort Benson and then Long Term Credit Bank of Japan (LTCB), where he was Head of Shipping Finance. He joined DVB following its acquisition of the LTCB Transportation business. After DVB's acquisition of Nedship Bank NV in 2000, he acted as Deputy Managing Director and Head of Risk Management at DVB Bank NV in Rotterdam for 2 years. Since 2002 he has been General Manager and Head of Shipping Finance in DVB's London Branch. He has 20 years of experience in banking, in 16 of which he has specialised in shipping finance. He holds a Master's degree from Pembroke College, Cambridge University.
Dora Kokota Dora Kokota is of Greek origin. She studied for her LLB at the University of Sheffield and has an LLM from Cambridge University where she specialised in finance law. She joined Stephenson Harwood in 2004 as a trainee solicitor. In September 2006 she will qualify into the Banking and Asset Finance Department, where she will specialise in shipping finance.
Ian Mace Ian Mace is an assistant solicitor in the Banking and Asset Finance Department of Stephenson Harwood. He graduated in law with European law from The University of Hull in 1999 and subsequently completed the Legal Practice Course at Nottingham Law School. He trained with Stephenson Harwood and qualified into their Banking and Asset Finance Department in 2004. He specialises in all aspects of ship finance.
Sheila Obhrai Sheila Obhrai has specialised in Ship Finance since qualification and is a Senior Associate at Stephenson Harwood. She advises international banks and financial institutions on all aspects of bilateral and syndicated lending and in particular has advised a number of international banks on high profile complex syndicated transactions. Sheila has extensive experience in relation to all types of financing arrangements for new buildings and second hand vessels as well as vessel related project financings. Sheila acts for banks as well as shipowners including first class banks and owners in the Middle East.
Struan Robertson Struan Robertson has practised in the maritime field for more than thirty years. He is Deputy Chairman of the International Maritime Industries Forum, a member of the Steering Committee of the London Shipping Law Centre and past chairman of the City of London Law Society Sub-Committee on Shipping and Aerospace law. He specialises in sale and purchase, shipbuilding, finance and cross-border leasing and has a particular interest in the C.I.S. and in the Gulf States due largely to an involvement with the tanker industry as a result of some years spent with a leading tanker owner in the Far East.
Mark Russell Mark Russell is the head of Stephenson Harwood's Banking and Asset Finance Practice Group. He acts for a range of banks and other lending institutions, as well as shipowners and North Sea operators, in a wide variety of ship finance, leasing and sale and purchase matters, and in connection with oil and gas exploration and project financing.
Jonathan Ward Jonathan Ward is a partner in the Banking and Asset Finance Department of Stephenson Harwood. He specialises in all aspects of ship finance including ship registration, sale and purchase, shipbuilding, structured ship finance and leasing matters, domestic and cross border. Jonathan represents ship finance institutions, lessors, shipowners, shipyards and contractors world-wide. Jonathan is a regular speaker at finance and shipping seminars and has lectured in the UK and abroad.
Gary J Wolfe Gary J Wolfe is a partner of New York City law firm Seward & Kissel LLP, where he heads that firm's capital markets group. He represents domestic and international clients mainly in securities, corporate and maritime matters. Mr Wolfe graduated from Cornell University and Yale Law School, where he was a founding editor of the Yale Journal of World Public Order. Mr Wolfe has served as President of the US Business Council for South Eastern Europe, Chairman of the Admiralty and Maritime Law Committee of the New York County Lawyers Association and a member of the Admiralty and Maritime Law Committee of the Association of the Bar of the City of New York.