Ship Finance Fundamentals
Corporate vs Vessel-level Borrowing
Summary
Corporate borrowing is raised against a business or group; vessel-level borrowing is typically contracted by a ship-owning entity for specified assets.
Why this matters in ship finance
The choice shapes creditor recourse, covenant testing, cash distribution and fleet diversification.
The concept
Corporate facilities can benefit from multiple vessels and group earnings, while asset facilities may ring-fence collateral and expose lenders to one trade or ship. Guarantees, cash pooling and cross-collateralisation can blur the distinction.
How it is used in practice
Compare financial covenants, permitted disposals, security release, group tax, dividend restrictions and insolvency scenarios for each structure.
Practical issues
SPV ownership is not necessarily non-recourse. Consolidation and lender rights depend on control, guarantees and governing documentation.
How ShipFinance.ai uses this concept
Show differences in cash-flow perimeter and collateral package for proposed borrowers.
Key takeaways
- Borrower perimeter drives monitoring
- SPVs do not imply legal risk isolation automatically
- Cross-security changes recovery rights
Primary legal, rule and scholarly sources
- Schinas, Grau & Johns (eds.), The HSBA Handbook on Ship Finance (Springer, 2015) - scholarly reference, not legislation
- Schinas & Kewitsch (2015), Loans and Risk Management Considerations, in BK3 - scholarly chapter
- IFRS 10 - consolidated financial statements (where IFRS applies)
- Loan Market Association - contractual loan documentation practice; not law