Portfolio, Investment & Restructuring
Debt Restructuring in Shipping
Summary
Debt restructuring changes financial claims when existing debt service becomes unsustainable or threatens asset value.
Why this matters in ship finance
The objective is to preserve economic value while negotiating a feasible allocation of losses and control.
The concept
Tools include tenor extension, principal reduction, payment deferral, new money, collateral amendments and debt-for-equity swaps. EU preventive-restructuring rules are implemented through national law; multi-jurisdictional fleets need separate analysis.
How it is used in practice
Construct going-concern and liquidation recoveries, creditor waterfalls, contractual consent requirements and a sustainable post-restructuring fleet cash flow.
Practical issues
Do not equate a negotiated standstill with an insolvency moratorium. Flag, mortgage and enforcement jurisdiction may diverge from borrower incorporation.
How ShipFinance.ai uses this concept
Compare restructuring solutions by creditor recoveries, sponsor dilution and business viability.
Key takeaways
- Viability and recovery value should be assessed together.
- Legal processes differ by jurisdiction.
- New cash and credible assumptions are often decisive.
Primary legal, contractual and/or rule sources
- Directive (EU) 2019/1023 — preventive restructuring and insolvency frameworks
- Regulation (EU) 2015/848 — cross-border EU insolvency proceedings, where applicable
- Loan Market Association — loan documentation and sustainable lending guidance; voluntary market standards
- Schinas, Grau & Johns (eds.), HSBA Handbook on Ship Finance (Springer, 2015) — analytical reference, not law