Sources of capital to finance ship purchases
"Ships have always represented a major capital investment for their owners. Even the earliest ocean going ships, although small, would have represented a major investment at the time - and a very risky one..." Shipping finance has become a generic term referring to the financing of maritime projects, which encompasses not just shipping, but also other sub-sectors like ports, shipyards, and containers. However, in the following section financing of shipping projects is confined.Shipping is a capital-intensive industry. Vessels constitute almost 90 percent of the fixed assets (net block and capital work in progress) of a typical shipping company. A LNG carrier costs around USD 250 million, a double-hulled VLCC costs around USD 90 million, a Handysized chemical ship is around USD 70 million. But ship values change up to 60 per cent in a few months. In such a scenario, a shipowner or a potential shipowner wishing to acquire a vessel finds a considerable gap in his personal funds availability and additional funds requirement.Shipping finance has to a large extent remained a specialty sector on account of a number of unique characteristics associated with the shipping industry
Generally, these institutions look for large sized shipping corporates for taking term lending exposure. This led to the creation of the Marine Division within ICICI in April 1997 to cater to the financing needs of corporates engaged in shipping, shipbuilding, ship repair and other marine related activities. Globally, governments have provided substantial financial support to respective shipping industries either directly or indirectly. All the risks (major or minor) and rewards of ownership are normally transferred to the lessee and the obligations are non-cancellable. Globally, a few banks like Christiana Bank, ABN Amro, Citibank have specialized in providing finance to the shipping industry. fund-based finance and non-fund based finance. These institutions finance ships or dredgers who have a firm long-term charter arrangement. ------------------------------------------------------------------------**Bibliography**BIBLIOGRAPHY Shipping Financing, By J. It can turn under-utilized resources into profit, create a new profit center, help the company or an individual to enter untapped markets, quicker and at less cost than trying it alone. Most of these banks are cautious about taking up long-term exposures.
Common topics in this essay:
Mezzanine Financing,
INTRODUCTION Ships,
Committee SDFC,
Varun Shipping,
Amro Citibank,
Joint Ventures,
Customer Lessee,
Off-Balance Sheet,
Credit Bank,
Financial Institutions,
financial institutions,
mezzanine financing,
public sector,
sector banks,
public sector banks,
shipping companies,
banks financial institutions,
venture capital,
private sector,
equity capital,
banks financial,
shipping industry,
non-banking financial institutions,
development credit bank,
bank debt equity,
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Acceptance Essays
