Financing Structures & Capital Sources
Convertible Debt in Maritime Transactions
Summary
Convertible debt grants holders debt claims with a contractual right or mechanism to acquire equity under specified conditions.
Why this matters in ship finance
It can reduce initial cash interest or defer dilution, while introducing complexity at conversion and maturity.
The concept
Conversion price, reset terms, anti-dilution protection, maturity, security and ranking define economic outcomes. Classification between liability and equity components depends on accounting rules and instrument terms.
How it is used in practice
Model cash-pay versus conversion scenarios and the resulting ownership, earnings per share and debt capacity.
Practical issues
Do not assume conversion eliminates all debt or that a particular instrument automatically qualifies as accounting equity.
How ShipFinance.ai uses this concept
Build a conversion waterfall showing fully diluted sponsor returns and refinancing alternatives.
Key takeaways
- Conversion terms influence effective financing cost.
- Dilution depends on market and reset conditions.
- Accounting classification requires instrument-level review.