BP’s Call for Capital

By Matt McCleery

Oil major fleet replacement deals bring out the best, and worst, in ship finance. Giving financiers long bareboat charters backed by strong credits and OPA indemnification provided by oil majors that are unwilling to take a residual value risk or accept ‘put’ options is like letting kids play with matches. Since fine pricing is required to be competitive on these deals, what often results is aggressive structures that don’t amortize enough principal and produce unwieldy residual values at the end of the charters. As a result, it’s no surprise that oil major deals are often financed with capital from outside the shipping industry. Whether its bond deals like First International, Windsor Petroleum, California Petroleum and Golden State, or equity structures such as Nordic American Tankers and Knightsbridge, history has proven that experienced shipowners and ship financiers have steered wide of oil major fleet renewal.

This is only an excerpt of BP’s Call for Capital

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