Financing Structures & Capital Sources
Bareboat Charter Financing
Summary
A bareboat or demise charter transfers possession and operating responsibility for a vessel to the charterer for an agreed period.
Why this matters in ship finance
It can underpin financing through long-term contracted rentals or allocate operating obligations differently from a time charter.
The concept
The allocation of crew, maintenance, insurance, registration and redelivery obligations follows the charter; financing structures may layer purchase options and lease accounting on top.
How it is used in practice
Test bareboat rental cover, operating covenants, charterer quality, title, purchase options and reversionary condition of the ship.
Practical issues
Do not conflate bareboat charter with ownership transfer or automatic recognition as an IFRS finance lease. Flag and bareboat-registration rules remain relevant.
How ShipFinance.ai uses this concept
Separate legal ownership, charter cash receipts and operating expenses for the lender credit case.
Key takeaways
- Demise transfers operational possession, not necessarily title.
- The charterer’s performance drives income.
- Registration and accounting treatment require separate review.