Security in ship finance transactions

What is the principal security package used in a ship finance transaction?

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Hi Despina :wave:
A typical ship finance transaction is a senior secured loan with a fairly predictable collateral (security) package which usually contains:

  • ship mortgages (based on the law of the Flag state)
  • general assignments (eg. assignment of vessels’ earnings, insurances)
  • letter of undertaking or manager’s undertaking
  • account security (based on the law of the location of the relevant account)
  • shares security (based on the jurisdiction of the company whose shares are subject to the security)
  • subordination agreements/ subordinated debt security (if any)
  • pre-delivery security (for newbuilding financings)
  • tripartite assignment
  • quiet enjoyment letter (for ships on long-term time charter)
  • direct arrangements

Of course, every ship finance transaction is different and above described security package can vary on a case-by-case basis.

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Thank you Pauline! :pray:

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