Security Package & Loan Documentation
Negative Pledge Clauses
Summary
A negative pledge restricts the borrower from creating specified additional security over assets without lender consent or an agreed exception.
Why this matters in ship finance
It protects the negotiated priority and debt structure but does not replace registered security or title checks.
The concept
The clause may cover present and future assets, restricted subsidiaries and permitted liens. Scope depends on definitions and carve-outs for ordinary-course claims, statutory maritime liens or permitted financing.
How it is used in practice
Review new borrowing, lease arrangements, sale-and-leaseback activity and proposed fleet transfers against permitted security baskets.
Practical issues
Negative pledges do not by themselves defeat third-party claims or prevent statutory liens. Their breach is an issue of contractual remedies.
How ShipFinance.ai uses this concept
Flag transactions and potential collateral leakage under financing scenarios.
Key takeaways
- Contractual restrictions are not real security
- Carve-outs determine practical scope
- Monitor new indebtedness and asset transfers