Credit Risk & Underwriting
Refinancing Risk
Summary
Refinancing risk is the possibility that debt cannot be renewed or replaced on viable terms when a shipping facility reaches maturity.
Why this matters in ship finance
It is acute when large balloon payments coincide with low freight rates, weak vessel values or tighter credit markets.
The concept
The refinancing outcome depends on loan balance, available cash, collateral value, cash-flow projections, interest rates and lender risk appetite. Sponsor support may provide a buffer only when legally and financially available.
How it is used in practice
Stress maturity LTV, interest cover, debt tenor, lender capital and asset sale proceeds; consider amortisation acceleration or maturity staggering.
Practical issues
A high current valuation is not proof of future refinanceability. Loans may be performing but still face material maturity risk.
How ShipFinance.ai uses this concept
Calculate maturity funding gaps across joint freight and ship-value scenarios.
Key takeaways
- Maturity is a separate risk horizon
- Balloon coverage is not assured
- Staggering and reserves reduce exposure
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
- Regulation (EU) No 575/2013 - Capital Requirements Regulation (CRR; lenders within scope)