LNG PROJECT FINANCING: The Shikemusen of the 21st Century

Leave it to shipping to be different; just as the accounting world governed by Federal Accounting Standards Board (FASB) is calling for debt to be consolidated onto balance sheets, the shipping industry is finally figuring out how to move it off balance sheets through project financing structures. Historically, in the world of ship finance, the term “project finance” was usually used as a euphemism for doing a deal with other people’s money. Even the term “project” is more often than not a subtle reference to the fact that the sponsor won’t provide any recourse or corporate guarantees.

Of course, this is an exaggeration. After all, we’ve seen tanker owners like Torm and Frontline tap the German KG market to increase liquidity and beef- up earnings per share. We’ve also seen companies such as International Shipholding, dubbed by one banker as “the next MC Shipping,” basically exist with the raison d’etre of arranging project financing. But thanks to the development of LNG shipping, project financing will play a greater role going forward.

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