US LEASING PRODUCTS RECONSIDERED

by Richard C. Cosse

Over the past several years, companies in the maritime and offshore industries have demonstrated growing interest in developing leasing structures to finance newbuilding programs and existing fleets. While shipowners have been somewhat preoccupied with the coming and going of the high yield and private placement markets, increasingly the use of leasing products, specifically US leasing products has provided the shipowner with viable financial alternatives to financing fleet expansion.

Recently, a major German shipowner financed a new 33,000 dwt chemical tanker utilizing a US leveraged leasing structure (“Pickle Lease”). The use of this structure enabled the company to minimize its lease payments and fix its cost of capital finance to reflect current market charter rates. While the preference items and respective present value benefit of the lease structure were modest, the lease did provide for 100% of the acquisition cost of the vessel and featured a fixed price early buy out option for the lessee.

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