ship finance basics

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Ship Financing The Basics

On behalf of HVB Global Shipping

Welcome to

WISTA CONFERENCE HAMBURG 2005


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God must have been a shipowner. He placed

the raw material far from where they are

needed and covered two thirds of the earth

with water.

Erling Ness


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Contents

3. Main Considerations

4. Financing Solutions

5. HVB Global Shipping


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Contents





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Different Types of Vessels

require Different Finance Solutions, e.g.

Project Finance vs. Corporate Finance

Spot Employment vs.

Long Term Contracts / Liners

but there is more to consider


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Borrower

Main

Considerations

Type of Vessel

Leverage

Loan Period

Employment

Security

Pricing

Portfolio


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1. Main ConsiderationsBorrower

Financial Performance, Rating

Management (technical / commercial)

Reputation, Experience, Track Record

Market Position

Strategy


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1. Main ConsiderationsType of Vessel

Newbuilding vs. Second Hand

Age and estimated Use of Life

Liquid Asset or Special Type

Second Hand Market

Age Distribution of World Fleet vs. Order

Book


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1. Main ConsiderationsType of Vessel NO GOES

Quelle: www.paris-

mou.org


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1. Main ConsiderationsLeverage

Building Price / Purchase Price vs. Market

Value

Market Volatility

Employment / Market Situation

Equity Contribution

Liquid Asset vs. Special Tonnage


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1. Main ConsiderationsLeverage - continued

Deutsche Schiffsbank's Henning Wintersaid

... 60% gearing had proved to be a

"bloody good rule" so far,

giving the banks "ample breathing space".

Quelle: Trade Winds 19.04.2002


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1. Main ConsiderationsLoan Period

Repayment Schedule

Balloon

Profile

Age at Maturity

Loan to Value Ratio


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1. Main ConsiderationsEmployment

Spot Trading / CoAs / Pool Arrangments /

Time Charter / Bare Boat

Risk of Re-Employment

Cash Flow Analysis


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1. Main ConsiderationsSecurity

First Priority Mortgage

Personell or Corporate Guarantee

Assignment of Income & Insurances

Documentation: e.g. Law, Covenants such

as MVC, Financial Covenants on Borrower /

Guarantor, cross default


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1. Main ConsiderationsPricing

Risk Adequate Margin over LIBOR

Grid Pricing

Underwriting Fee & Participation Fee

Commitment Fee

MEET YOUR RETURN REQUIREMENTS

BUT REMEMBER THERE ARE

COMPETITORS


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1. Main ConsiderationsPortfolio

Tonnage Diversification

Average Loan to Value

Repayment Profile

Market Situation in terms of

VALUES, RATES, PRICING


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1. Main Considerationslast but not least

EXPECTATION OF YOUR CLIENT

High Leverage, Low Equity

Long Loan Period

Low Pricing

No Covenants


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Contents





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Plain Vanilla Asset Finance

Structured Project Finance

Corporate Finance

Leasing Structures

German KG


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2. Financing SolutionsPlain Vanilla Asset Finance

s e.g. VLCC

s spot trade

s non-recourses reputable manager

60% leverage

8 12 yrs term

15 yrs profile (max.)


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2. Financing SolutionsStructured Project Finance

s e.g. LNG Carrier

s long term time charter

contract with energy

major

s technial

management !!!

up to 90% leverage

10 - 15 yrs term

15 - 20 yrs profile


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2. Financing SolutionsCorporate Finance

s e.g. Cruise Vessel

s listed corporates as

borrower

s generally no mortgage

RCF in large syndicates

5 7 years

bullet

generally undrawn


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2. Financing SolutionsLeasing Stuctures

s e.g. LNG/Container/Car

Carrier

s long term bare boat

charter

s industrial shipping / liner

industry

annuity style facility

10 15 yrs loan period

put option at maturity

tax benefits

documentation risk


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2. Financing SolutionsKG Finance

s e.g. Container, Tanker,

LNG

s generally newbuildings

s long term time charter

s reputable charterer

s equity by privat German

investors

60 70 % leverage

10-12 yrs term

for long time rather closed

banking market


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Do you want to know more

please be kindly invited to join the afternoon

session.


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Contents





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Market Experience: north of 30 years

Portfolio: north of EUR 4 bn.

Vessels: north of 800 vessels

Regions: world-wide

Offices: Hamburg, Piraeus, Oslo

Staff: in total 17 Relationship Managers, 15

Credit Specialists, 7 Team Assistants


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20% shareholder in Deutsche Schiffsbank

AG

Shareholder in First Ship Lease

Shipyard Consulting

we finance as well

BOXES,

TERMINALS and the

Offshore Industry


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come and visit us at

www.hvb.de/globalshipping


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Thank you very much for

your attention

Further questions??? Or contact me:Oliver Trennt, +49-40-3692-4069


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