Lubricating Transactions with Ship Mortgage Indemnity

As every owner knows, when the commercial bank market is tight, it can be difficult to obtain sufficient gearing levels to finance either a newbuilding or a second hand acquisition. However, a new financial instrument has now been made available, known as Ship Mortgage Indemnity or SMI, which has been designed to assist owners and lenders in getting deals done. SMI helps lenders and ship owners achieve the common goal of arranging secured loans on viable transactions where the lenders might not otherwise have been able to lend the amount needed by the owner, due to the borrower requiring higher loan-to-value levels.

On viable transactions, shipping banks will normally lend 60-70% of the value of a vessel, leaving the borrower to find the difference from other sources. Whether the company concerned is large or small, financing this 30-40% shortfall can represent a substantial portion of available capital, locking up funds which could be applied more profitably elsewhere in the business.

This is only an excerpt of Lubricating Transactions with Ship Mortgage Indemnity

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.