Shipping Market Influences On Shipping Finance Business Essay

1.3.Shipping Market Influences on Transporting Finance 13

Transporting market is divided into many different sectors and is characterized by cyclicality. Cycles play a cardinal portion in the finance of the transportation industry by pull offing the hazard of transporting investing in a concern where there is a great uncertainness about the hereafter. The most of import characteristic of the Transporting market features is that for much of the clip it is far excessively unpredictable to supply bankers or anyone else with much counsel on the future net incomes or the indirect value of the vass they finance. The capriciousness of transporting grosss ensuing in falling plus values impacts on the creditworthiness of the industry in general. The transportation rhythms have the undermentioned features 15 & A ; 17: 13

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Phase 1: Trough – characterized by transporting capacity excess, cargo rates fall to operating costs, deficiency of liquidness, sell vass at hurt monetary values, old vass monetary value autumn to trash monetary values, destruction increased, low cargos and tight credits create negative net hard currency flow. 13

Phase 2: Recovery – characterized by addition of supply and demand, freight rates increase above operating costs, liquidness improves and 2nd manus monetary values addition. 13

Phase 3: Peak/Plateau – characterized by tight balance of supply and demand, freight rates are high two or three times above operating costs, proprietors become really liquid, Bankss are acute to impart, 2nd manus monetary values addition and shipbuilding order book expands. 13

Phase 4: Collapse – characterized by prostration of the market as supply overtake demand, topographic point ships build up in cardinal ports, cargo rates fall, liquidness remains high, sentiment is confused altering with each mass meeting in rates. 13

The above features are a fiscal switchbox that regulates investing. Therefore as Bankss have to procure its investing they have to see the undermentioned hazards coming from the features of the Transporting market rhythms mentioned above 3: 14

Market hazard: Transportation markets cycles vary unpredictable in length and badness which affects company ‘s ability to run into duties and the value of collateral. 14

Operating hazard: Failure to follow with ordinances every bit good as proficient jobs may be take the ship off hire or port detainment making jobs with the categorization society and insurance. 14

Counterparty hazard: Charterers creditworthiness must be considered. 14

Competitive hazard: Competition environment may be affect company ‘s fiscal public presentation. 14

Diversification hazard: Diversification reduces risks if the sector rhythms are non correlated and specialisation additions it. 14

Ship size and age hazard: New ships carry a high capital costs and are vulnerable to alterations in capital costs. In contrast old ships face lower capital costs and are vulnerable to runing, fix and regulative costs. 14

Fiscal Structure: Debt must be services harmonizing to market fortunes. 14

2.BANKING PRODUCTS FOR SHIP ACQUISITION ( Part 2 ) 15

3.OTHER SOURCES FOR SHIPPING FINANCE ( Part 3 ) 18

3.1.Ships ‘ Renting Business 18

3.2.Offset Renting Runing Costss 20

3.3.The Concept of Securitization 21

Decision 22

Mentions 23

hypertext transfer protocol: //books.google.gr/books? id=vqByi9ITtv8C & A ; pg=PA76 & A ; lpg=PA76 & A ; dq=shipping+fmarkets+characteristics+in+finance+of+ship+acquisition & A ; source=bl & A ; ots=YPPjKAVEN2 & A ; sig=Dn4Vjtpz3ycGe2hWlWU5CiapRwI & A ; hl=el & A ; ei=D39STcrCNImk8QO-64CjCw & A ; sa=X & A ; oi=book_result & A ; ct=result & A ; resnum=5 & A ; ved=0CEYQ6AEwBA # v=onepage & A ; q & A ; f=false ( As accessed on 9/2/2011 ) 24

hypertext transfer protocol: //marinepedia.blogspot.com/2009/09/shipping-market-cycles.html 24

( As accessed on 9/2/2011 ) 24

( As accessed on 9/2/2011 through Internet ) 24

hypertext transfer protocol: //www.unescap.org/ttdw/Publications/TFS_pubs/Pub_1835/Pub_1835_Ch5.pdf 24

( As accessed on 9/2/2011 ) 24

hypertext transfer protocol: //www.nap.edu/openbook.php? record_id=5064 & A ; page=111 25

( As accessed on 9/2/2011 ) 25

hypertext transfer protocol: //www.unctad.org/en/docs/rmt2010ch1_en.pdf 25

( As accessed on 10/2/2011 ) 25

BIBLIOGRAPHY 25

Table of Figures

Figure 1: Steel consumers and manufacturers in 2009 ( universe market portion in per centums ) 5

Figure 2: World Oil Demand in Million Barrels per twenty-four hours 7

Figure 3: Estimated lading flows on major East-West container trade paths, 2008-2009 8

Figure 4: Global container trade, 1990-2010 ( TEUs and one-year per centum alteration ) 8

Figure 5: Indexs for planetary container, oiler and major dry majorities volumes, 1990-2010 9

Figure 6: Number Of Lease Contracts Expiring By Year 19

Introduction

Ship finance is about measuring and procuring transportation hazard and a bank ‘s precedence is to procure its investing. Transporting market rhythms create hazards for both investors and loaners and it is the primary drive force behind both investing and renting. Changes in the demand and supply of ships lead to a deficit or excess in tunnage capacity, which in bend leads to an addition or lessening of cargo rates. This cyclicality influences the right balance between debt and equity from both a hazard and reward consideration. In this piece of paper we will depict transporting market factors influence ship finance, the chief and alternate beginnings of ship finance and the manner to procure our investing.

Transportation MARKETS REVIEW 2008-2010 ( Part 1 )

Transporting Freight Ratess

Dry Bulk Market

During the 4th one-fourth of 2008, the mentality for the dry majority sector was looking bleak when the plumping Baltic Exchange Dry Index ( BDI ) made the headlines.

In tandem with the BDI, steel production, the chief driver of dry majority cargos ( Figure 1: Steel consumers and manufacturers in 2009 ( universe market portion in per centums ) ) , fell aggressively in 2009 ( by 8.0 per cent ) . This brought entire end product down to 1,219.7 million dozenss ( compared to 1,326.5 million dozenss in 2008 ) . At the same clip, universe demand for steel contracted by 6.7 per cent in 2009, with the entire volume standing at 1,124.3 million tons.29 Surprisingly, nevertheless, the dry majority market, driven chiefly by strong demand from China, did non execute every bit severely as expected, with volumes of Fe ore, the cardinal natural input stuff used for the production of steel executing peculiarly well20.

Figure 1: Steel consumers and manufacturers in 2009 ( universe market portion in per centums )

Oil tankers Market

Although the oiler transportation sector was hit by the economic crisis, proprietors and charterers did non ache under jobs like other transporting sectors.

Demand for oilers is influenced by universe oil demand and supply, which in bend is affected by factors such as international economic stableness, geographic alterations in oil production and ingestion, monetary value degrees of oil, stock list policies of major oil trading companies and strategic policies of states.

“ The unprecedented planetary economic recession lead to a 2nd back-to-back twelvemonth of reduced universe oil demand ( Figure 2: World Oil Demand in Million Barrels per twenty-four hours ) which, coupled with considerable OPEC production cuts and big newbuilding influxs, created an air of uncertainness that pushed topographic point rates to degrees near or below vass ‘ operating disbursals. ”

In 2010, freight rates recovered on the dorsum of stronger demand due to the planetary economic recovery, lower oil stocks, and inclement conditions, but they are still below their historic norms. The topographic point market is the most volatile peculiarly for the larger vass. In May 2010, the annual clip charter day-to-day rate rose to $ 43,000 for VLCCs, $ 25,000 for Suezmaxes and $ 18,500 for Aframaxes. The mean rates for 2009 were $ 39,600, $ 30,600 and $ 20,100 severally and for 2008, $ 73,400, $ 47,200 and $ 35,800. The rising prices adjusted 10-year mean rates for these vass are $ 52,500, $ 39,300 and $ 29,900 severally. With day-to-day vas operating disbursals at around $ 9,500 for a modern VLCC and $ 8,500 for modern Suezmaxes and $ 7,500 for modern Aframaxes, even at current cargo degrees, this leaves a healthy EBITDA border 14.

Figure 2: World Oil Demand in Million Barrels per twenty-four hours

Containers Market

The planetary fiscal crisis and subsequent economic recession dented demand for consumer and manufactured goods, every bit good as for durable goodss. As these goods are chiefly carried by container, and as major importers, viz. the United States and Europe, were severely hit by the recession, container trade received a major blow. Container traffic along the three major east-west container trade paths, viz. the trans-Pacific, Asia-Europe, and the trans-Atlantic, was the most significantly affected, with volumes entering double-digit diminutions on some of the major legs ( Figure 3: Estimated lading flows on major East-West container trade paths, 2008-2009 and Figure 4: Global container trade, 1990-2010 ( TEUs and one-year per centum alteration ) ) In 2009, aggregate Asia-Europe volumes declined by 9.5 per cent, with the caput draw section from Asia to Europe catching by 14.8 per cent. This contrasts significantly with the impressive one-year growing rate of about 20.0 per cent recorded antecedently. Trade on the trans-Pacific path fell by 9.3 per cent, with peak leg volumes worsening by 14.2 per cent. Trade between the United States and Europe slumped by 20.1 per cent, with volumes from the United States to Europe falling by 25.1 per cent. The transatlantic trade was severely hit by the combined consequence of worsening volumes, unsustainably low cargo rates, and lifting sand trap costs. The troubles faced by the container sector were besides reflected in dramatically lower container cargo rates and container ship charter rates, which collapsed net incomes for shipowners and caused a spread between the pre-2009 and post-2009 value of container ships 20..

Figure 3: Estimated lading flows on major East-West container trade paths, 2008-2009

( 1000000s of TEUs and one-year per centum alteration )

Figure 4: Global container trade, 1990-2010 ( TEUs and one-year per centum alteration )

Figure 5: Indexs for planetary container, oiler and major dry majorities volumes, 1990-2010

Therefore we can reason that seaborne trade volumes were significantly impacted by the falling planetary demand that followed 2009 ‘s historical contractions in universe GDP and ware trade ( Figure 5: Indexs for planetary container, oiler and major dry majorities volumes, 1990-2010 ) . All transportation sections have been negatively affected, with the exclusion of the major dry majorities which showed more resiliency due to China ‘s robust demand for coal and Fe ore.

In amount, the factors affect freight rates are the undermentioned:

Demand and Supply

Global economic state of affairs

Vessels efficiency and capacity

Environmental ( i.e conditions )

Stock degrees

Transportation paths and distance

Oil monetary values

Geographic alterations of oil production

Vessels runing costs

Developing economic systems

Financing Vessels ‘ Acquisitions

The factors that influence funding of ship acquisition are the undermentioned:

Transporting Market kineticss: When market is on the peak phase telling ships is a bad concern as the ship monetary values are really high.

Freight rate kineticss: When cargo rate rise or fall the changing sentiment ripplings through into the sale and purchase market and from at that place into the new edifice market.

Supply & A ; Demand: When demand exceeds supply there is a demand of more vass to be purchased.

Furthermore the undermentioned factors affect ship funding rating and choice 19:

Net nowadays value ( NPV ) : To compare funding strategies, the shipowner performs NPV computations for each option, dismissing the hard currency escape required to pay involvement and debt amortisation at a rate that reflects the cost of capital or chance costs ( the rate of return available through other investings ) . The shipowner will normally see the option with the lowest NPV to be the most favourable. Typically, the lowest NPV is associated with funding that allows the shipowner to borrow the greatest per centum of the monetary value, to be repaid over the longest period of clip, at the lowest available involvement rate and inception cost. While at first glimpse the option with the lowest NPV is the best, there are other considerations. Beyond monetary value and bringing, they include involvement during building, proprietor ‘s supervising and program review, attendant legal and underwriting costs, and other disbursals included in the proprietor ‘s entire acquisition cost ( capitalized cost ) .

Cash flow: Cash flow considerations can take a shipowner to choose a funding strategy that does non hold the lowest NPV. For illustration, if all debt refunds are delayed for three old ages, the shipowner may prefer this alternate ( peculiarly if purchasing in a “ down market ” ) , even though entire payments will be greater over clip. The proprietor will see mode of debt amortisation, whether in equal one-year principal sums ; “ flat debt ” payments ( like a typical place mortgage ) ; or low amortisation in the early old ages with a “ balloon ” payment at the terminal of the funding term.

There are many factors that influence the chance of hard currency flows in ship operations, among which the followers are considered most of import 18:

( a ) Degree of cargo rate and measure of lading lifted ;

( B ) Ship acquisition monetary value ;

( degree Celsius ) Footings and conditions of ship finance:

( I ) Interest rate

( two ) Loan refund period

( three ) Maximum loan coverage

( four ) Grace period of loan

Collateral demands: The collateral required of the shipowner by the loaner will besides be a major consideration in measuring funding options. One loaner might necessitate elaborate fiscal information on all the proprietors of a vas and personal every bit good as extended corporate confidences or warrants. Assignment of gross watercourses from charters or other vessel-employment agreements might besides be required. Another loaner may be satisfied merely with the ship as collateral for the loan, with few extra demands. The possible fluctuations and substitutions are eternal and play an of import portion in the shipowner ‘s rating procedure.

Transporting Market Influences on Transporting Finance

Transporting market is divided into many different sectors and is characterized by cyclicality. Cycles play a cardinal portion in the finance of the transportation industry by pull offing the hazard of transporting investing in a concern where there is a great uncertainness about the hereafter. The most of import characteristic of the Transporting market features is that for much of the clip it is far excessively unpredictable to supply bankers or anyone else with much counsel on the future net incomes or the indirect value of the vass they finance. The capriciousness of transporting grosss ensuing in falling plus values impacts on the creditworthiness of the industry in general. The transportation rhythms have the undermentioned features 15 & A ; 17:

Phase 1: Trough – characterized by transporting capacity excess, cargo rates fall to operating costs, deficiency of liquidness, sell vass at hurt monetary values, old vass monetary value autumn to trash monetary values, destruction increased, low cargos and tight credits create negative net hard currency flow.

Phase 2: Recovery – characterized by addition of supply and demand, freight rates increase above operating costs, liquidness improves and 2nd manus monetary values addition.

Phase 3: Peak/Plateau – characterized by tight balance of supply and demand, freight rates are high two or three times above operating costs, proprietors become really liquid, Bankss are acute to impart, 2nd manus monetary values addition and shipbuilding order book expands.

Phase 4: Collapse – characterized by prostration of the market as supply overtake demand, topographic point ships build up in cardinal ports, cargo rates fall, liquidness remains high, sentiment is confused altering with each mass meeting in rates.

The above features are a fiscal switchbox that regulates investing. Therefore as Bankss have to procure its investing they have to see the undermentioned hazards coming from the features of the Transporting market rhythms mentioned above 3:

Market hazard: Transportation markets cycles vary unpredictable in length and badness which affects company ‘s ability to run into duties and the value of collateral.

Operating hazard: Failure to follow with ordinances every bit good as proficient jobs may be take the ship off hire or port detainment making jobs with the categorization society and insurance.

Counterparty hazard: Charterers creditworthiness must be considered.

Competitive hazard: Competition environment may be affect company ‘s fiscal public presentation.

Diversification hazard: Diversification reduces risks if the sector rhythms are non correlated and specialisation additions it.

Ship size and age hazard: New ships carry a high capital costs and are vulnerable to alterations in capital costs. In contrast old ships face lower capital costs and are vulnerable to runing, fix and regulative costs.

Fiscal Structure: Debt must be services harmonizing to market fortunes.

Banking PRODUCTS FOR SHIP ACQUISITION ( Part 2 )

1The chief methods of raising ship finance include private financess, bank loans, the capital markets and particular intent companies SPCs. However bank loans are a major beginning of finance for ship-owners and transporting companies, offering the following four chief merchandises:

Mortgage loans secured against the ship: Mortgage loans may be lower priced than other signifiers of adoption because the value of the ship reduces hazard for the loaner. The flexibleness of involvement rates besides adds to the benefits of mortgage loans. Here, the involvement rates may be fixed for the life of the loan or can be changed at certain predefined periods. The sum paid per period and the frequence of payments, in some instances, the sum paid per period may alter or the borrower may hold the option to increase or diminish the sum paid.

The refunds may depend on vicinity, revenue enhancement Torahs and prevalent civilization. Another of import thing is that during our involvement merely period, our full monthly payment is revenue enhancement deductible. However for big transportation companies, borrowing against single ships is inconvenient because any alteration in the fleet creates a clip devouring loan dealing. For this ground I believe that mortgage loans are non addressed to big companies with good established fiscal construction that frequently prefer to borrow utilizing their corporate balance sheet as collateral. In other word they prefer a corporate loan.

Corporate loans secured against the company balance sheet in order to extinguish repayment stableness hazards. This sort of loans has three limitations.Fistly Banks progress limited sums so big loans must be syndicated amongst a group of Banks. Pull offing big syndications is hard when transporting market is hapless. Furthermore loans are normally restricted to 5-7 old ages and an beforehand rate of 70-80 % both of which are restricting. 2

Shipyard recognition is another manner of raising capital through debt, which is provided direct by the shipyards or authoritiess by offering warrants or even involvement rate subsidies. Obtaining authorities warrants gives the ship-owner the ability to raise capital through a commercial bank, which will utilize the warrant for securitization. From the shipyard perpective this sort of warrants with favourable footings comparing to market criterions is a large advantage for the shipyard as it can pull more market sections. Furthermore the subsidisation of involvement rate has been used to reimburse for the difference between the fixed agreed rate on the jurisprudence and the current market rate. However such fiscal strategies have been under difference and will be abandoned in instance of understanding upon the footings of OECD ( Organization for Economic Co-operation and Development ) on Export Credit of Ships.12

Mezzanine finance can shut the spread between debt and equity and describes the degree of capital between senior debt and equity. However mezzanine finance provides an expansive bed of subordinated debt, runing hard currency flow from vass may frequently be insuffecient to supply equal coverage of both senior and subordinated charges, therefore jeopardizing the whole undertaking. Therefore one believe that Mezzanine funding does non hold the potency of earnestly taking a large crunch out of the mortgage-based loan portion, since it is seen as an expensive option for the ship-owner and a high hazard one for the banks.12

Private arrangement is funding acquired by selling securities straight to a little figure of private investors, normally institutional investors such as Bankss, insurance companies and pension financess. Private arrangements are the most widely used and diverse agencies of raising capital.A They are used by all types and sizes of entities runing from little startups to big international companies in demand of concern support beginnings. In today ‘s economic clime there are fewer concern support sourcesA through the transportation market.A Using a large bank to fund our undertaking may go forth us mid-project and out of funds.A Private arrangement allows borrowers to waive the transportation market all together by tapping into the private investors market.A Private arrangement is regulated, no-fuss, and low key.A In a clip where support seems to be drying up, private arrangement on a assortment of fiscal instruments keeps commercial support alive and traveling ahead.11

The Institutions offer the above mentioned merchandises are the undermentioned:

Commercial Banks offer mortgage loans and corporate loans. Commercial Banks ‘ loan policies contain a uniformity sing their strategic attack. Commercial Banks secure their investing by procuring the ship or the company ‘s balance sheet. In instance the borrower does non hold any money for the refund of the loan so Commercial bank follow the comparative legal power for the arrestment of the ship or any belongings belongs to the borrower. Extinguishing possible hazards the bank has to procure its investing every bit good as its clients liquidness and trustiness.

Investing Banks do non supply capital themselves. They arrange loan syndications, public offerings of equity, bond issues in the capital market, and the private arrangement of debt or equity with fiscal establishments or private investors.

Governments, Shipyards and State-owned bureaus offer ship building recognition through warrants, public offering or involvement rates subsidies that help the borrower to raise his capital with a debt offering good footings and a fixed rate from a 3rd party fiscal establishment or a bank.

OTHER SOURCES FOR SHIPPING FINANCE ( Part 3 )

Ships ‘ Leasing Business

Leasing is another method of ship funding. It is a 100 % funding method, which is strong alleviation to the ship-owner, particularly on high ship-price clip. Renting ships by funding is the internationally adopted manner of ship funding. It is a funding behaviour of transporting endeavors to rent ships by funding from renting companies, recognition companies and other professional establishments, wage rents on a regular basis and financially busy the ownership of ships. It can significantly advance the development of transportation endeavors and the ship industry, and better the state of affairs where the ship industry, particularly the ship export, depends badly on the national policy recognition capital. However, the operation of the ship fiscal leasing concern needs professional establishments and the support of relevant policies. 6 A straightforward leasing construction would be set up as follows: The ship is sold by the transportation company to a bank and leased back from the bank under a long-run understanding which gives the former proprietor control over the operation of the plus. Title to the vas is vested in the bank or may be in a separate particular purpose vehicle. The bank benefits by taking revenue enhancement advantages in its place legal power. 2

Renting constructions vary depending on the complexness of the trade and are chiefly revenue enhancement driven.

Tax allowances is the most of import facet in a lease strategy. A ship-owner refunding a loan is taxed on the premium and allowed for in the involvement charged by bank. Conversely, the rental payments are usually allowable in full for revenue enhancement intents. Even more, the plus does non look in the balance sheet of the ship-owner. The lease giver likewise enjoys revenue enhancement allowance virtues from deprecating expensive assets such a ship.4

However, as ship renting benefits are related and depended from the renting minutess jurisprudence of each state different chances for revenue enhancement evasive funding strategies have been developed in states where revenue enhancement ordinances have allowed it. The cardinal legal powers around the Earth on that affair are United Kingdom, Japan, Germany, Norway and the United States. In all instances, the cardinal drive force behind these investing strategy is the sheltering of the personal revenue enhancement liabilities for single investors. 4

Such alternate investing vehicles are by and large animals of stronger markets, where the charterers feel comfy locking in degrees that are compensatory to proprietors, covering debt service, runing costs and supplying a return on equity. For illustration Global Ship Lease ( GSL ) leased away its fleet of ships in 2007 and 2008 over long-run periods, locking in future gross rates. As a consequence, despite the fact that the transportation industry has been hit difficult and transporting rates have fallen industry-wide, GSL continues to turn in net incomes. This should go on, as no rentals are set to run out until December of 2012, and even so merely 2 of the company ‘s 16 ships will necessitate new contracts. The undermentioned chart ( Figure 6: Number Of Lease Contracts Expiring By Year ) illustrates how long the company ‘s ships have been leased out for at guaranteed rates: 8

Figure 6: Number Of Lease Contracts Expiring By Year

Offset Leasing Running Costss

Leases are in kernel paying rent for plus. But even though the plus is rented, the lease giver will bear down involvement on outstanding balances. Lease involvement is normally calculated by a simple involvement expression and will non intensify over the lease term. The lease payment ( monthly, semimonthly or perchance quarterly ) have to include the necessary involvement. Besides, since rental sums have simple involvement, there is seldom an advantage to paying off the rental sum early.

Business plus depreciates quickly. The concern must account for this depreciation instantly during the first twelvemonth of the rental. The depreciation is a cost associated with geting the plus and reflects the lost collateral available to procure the rental sum. Business are able to subtract this depreciation on revenue enhancements over clip but the lost value is a really existent cost to the concern.

Major capital plus rentals involve bringing, and set up costs to acquire the plus operating. These costs may non be covered by the rental sum and considered an extra charge to the concern. Leaseholders should be after on holding the necessary hard currency available anterior to acquisition to pay these costs if non covered by the rental sum. It should be possible, nevertheless, to negociate a charge history with the seller and paying the entire sum over clip. 9

However these running costs can be offset as the transportation company is in an advantageous place by having finance over a period in which it can moderately cipher its hard currency flow through charter agreements. Interest costs are reduced as revenue enhancement benefits accruing to the bank can be reflected in the rental agreements. Equally of import is the fact that the transportation company does non have the ship and hence the funding cost does non look on its balance sheet and so the company ‘s debt to equity ratio is non effected, mostly giving the company greater borrowing power.2

Furthermore selected activities are outsourced to quality service suppliers by the lease giver, in order to maintain operating expenses low and let the concern to be readily scalable. A good illustration is GSL ( Global Shipping Lease ) that continue to outsource, under close supervising, the daily proficient direction of its fleet to well-established ship directors with considerable expertness. This attack facilitates both the tailoring of ship direction to the penchants of charterers and effectual cost control and hazard direction. GSL ‘s initial charterer is CMA CGM, which is the 3rd largest line drive transporting company in the universe. GSL intends to selectively spread out its client base over clip, capitalising on the industry expertness and extended relationship web of its direction squad and Board of Directors. GSL has predictable hard currency flows due to its long-run contracts. In its SEC filings the company to the full discloses the length of each charter contract, every bit good as the sum they are paid on a day-to-day footing for renting each ship. The company ‘s disbursals are comparatively easy to estimate if non disable, excessively, since GSL really outsources “ ship direction ” to a division of CMA CGM.13

Finally I believe that a dialogue between leaseholder and lease giver is needed prior to a leasing understanding in order for both parties to procure their investing.

The Concept of Securitization

In a universe where the absolute sizes of transporting portfolios are turning, and where Bankss are progressively focused on degrees of hazard based modesty capital, the ability to make liquidness and transportation hazard ( that otherwise would remain with pillar industry support beginnings ) is a utile add-on to the bankers ‘ toolkits.1

Securitization plans are advanced funding vehicles. Securitization involves the transition of a hard currency flow from a portfolio of assets into a security ( normally a debt instrument ) which is so sold to investors secured on the implicit in assets of the issuer, and is frequently combined with some signifier of recognition sweetening. Some of the benefits of securitization include off-balance sheet funding, which is an cheap agencies of raising financess, entree to a broader investor base, a decrease in involvement rates, and procuring the dealing from the possible bankruptcy of the originator.2

Securitization works best where there is a big pool of assets with similar risk/reward profiles. It is possible to construction a ship funding bundle whereby a portfolio of assets i.e. receivables from a long-run charter, is sold to a particular purpose company owned by a particular purpose trust. The issuer of the debt instruments will hold the advantage of being situated in a legal power known to institutional investors around the universe. Law allows for ‘purpose ‘ trusts to keep assets for a commercial intent. This takes the plus off the balance sheet of the conceiver, and renders it bankruptcy remote. This can do a multi-jurisdictional dealing less revenue enhancement burdensome and is frequently used in the funding of significant capital assets. Besides, a purpose trust can be used for the “ securitization ” of assets from other jurisdictions.2

Under, the Basel II Accord, Bankss can acquire “ economic capital alleviation ” when loans are placed into a qualifying securitization construction, significance that Bankss may except hazard exposure from computations of economic capital, if a portfolio has been securitized. From an industry broad position, the liquidness facet of the securitization procedure is paramount. 1

Decision

Mentions

Securitization of Transporting Loans hypertext transfer protocol: //www.conconnect.com/Workingpapers/janesecuritizationjan2006jan10.pdf

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Appleby – Guide to Bermuda Ship Registration and Finance hypertext transfer protocol: //www.applebyglobal.com/uploaded/Publication/362_File_5.pdf

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MBA Knowledge Base – The Concept of Securitization

hypertext transfer protocol: //www.mbaknol.com/financial-management/the-concept-of-securitization/

( As accessed on 6/2/2011 )

Transporting Finance

hypertext transfer protocol: //www.martrans.org/docs/theses/orfanidis.pdf

( As accessed on 7/2/2011 )

Renting Redux

hypertext transfer protocol: //www.conconnect.com/Workingpapers/Janesleasenov2007.PDF

( As accessed on 7/2/2011 )

Research Report on Chinese Ship Financial Leasing Industry, 2009-2010

hypertext transfer protocol: //www.reportlinker.com/p0147919/Research-Report-on-Chinese-Ship-Financial-

Leasing-Industry.pdf

( As accessed on 7/2/2011 )

Ship-leasing, lease-to-own systems offered to hike RP RoRo service

hypertext transfer protocol: //www.philstar.com/Article.aspx? articleId=613760 & A ; publicationSubCategoryId=108

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Global Ship Lease: Shouting Buy or Screaming Downside Risk?

hypertext transfer protocol: //seekingalpha.com/article/186206-global-ship-lease-screaming-buy-or-screaming-

downside-risk

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Major capital plus rentals involve bringing, and set up costs to acquire the plus operating.

hypertext transfer protocol: //www.ehow.com/list_6726551_lessee-year-equipment-capital-lease_.html

( As accessed on 7/2/2011 )

Mezzanine Finance hypertext transfer protocol: //www.zacharyscott.com/pdf/financingtypes/Mezzanine % 20Financing % 20Win04 % 20Insight.pdf

( As accessed on 8/2/2011 )

Finance and Funding Servicess

hypertext transfer protocol: //www.caribbeanlandandproperty.com/offshore_company_offshore_banking/Project_and_Business_Funding_and_Financing

( As accessed on 8/2/2011 )

Alternate Beginnings of Raising Capital in Ship Finance

hypertext transfer protocol: //www.maritimeeconomics.com/system/files/downloads/Thesis_Tzavaras_PONL.pdf

( As accessed on 8/2/2011 )

Global Ship Lease – Business scheme

hypertext transfer protocol: //www.globalshiplease.com/bus_strategy.cfm

( As accessed on 8/2/2011 )

A REVIEW OF THE GLOBAL Transportation Market

hypertext transfer protocol: //shipping.capitallink.com/files/barronsshippingarticle.pdf

( As accessed on 9/2/2011 )

Transporting Finance

hypertext transfer protocol: //books.google.gr/books? id=vqByi9ITtv8C & A ; pg=PA76 & A ; lpg=PA76 & A ; dq=shipping+fmarkets+characteristics+in+finance+of+ship+acquisition & A ; source=bl & A ; ots=YPPjKAVEN2 & A ; sig=Dn4Vjtpz3ycGe2hWlWU5CiapRwI & A ; hl=el & A ; ei=D39STcrCNImk8QO-64CjCw & A ; sa=X & A ; oi=book_result & A ; ct=result & A ; resnum=5 & A ; ved=0CEYQ6AEwBA # v=onepage & A ; q & A ; f=false ( As accessed on 9/2/2011 )

Marinepedia – Transporting Market Cycles

hypertext transfer protocol: //marinepedia.blogspot.com/2009/09/shipping-market-cycles.html

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Analysis and Forecast of the Capesize Bulk Carriers Transporting Market utilizing Artificial Neural Networks.

( As accessed on 9/2/2011 through Internet )

Estimates OF COSTS OF ACQUIRING REPLACEMENT VESSELS

hypertext transfer protocol: //www.unescap.org/ttdw/Publications/TFS_pubs/Pub_1835/Pub_1835_Ch5.pdf

( As accessed on 9/2/2011 )

Appendix C- Making Financing Decisions in the U.S. Shipbuilding Industry

hypertext transfer protocol: //www.nap.edu/openbook.php? record_id=5064 & A ; page=111

( As accessed on 9/2/2011 )

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT – Reappraisal of Maritime Transport 2010

hypertext transfer protocol: //www.unctad.org/en/docs/rmt2010ch1_en.pdf

( As accessed on 10/2/2011 )

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