BIMCO, the world’s largest international shipping association, has adopted a contract standard designed to make negotiating transactions easier and cheaper on sale and leaseback deals, the association said.
The new standard was developed following an industry-wide consultation and comes as leasing deals become more prevalent in shipping finance. Sale and leaseback transactions have seen a substantial increase in recent years as an alternative method of ship financing.
BIMCO’s documentary committee adopted ‘Shiplease’, a term sheet, which has been developed for sale and leaseback transactions involving second-hand ships but can be readily adapted for new-builds.
Shiplease was developed by an Asian-based drafting committee and involved major shipping and ship leasing companies and law firms. The drafting committee was chaired by Nick Fell, executive vice-president, corporate services and general counsel of BW Group.
Sabrina Chao, president-designate of BIMCO and chairman of Wah Kwong Shipping Holdings Limited, a representative on the drafting committee that developed Shiplease, said: “In turbulent times, it is important for shipowners to be able to free up capital while maintaining the ability to operate a vessel and trade as owners under a long-term lease. The term sheet sets out a user-friendly basis for negotiating the deal.”
Andreas Sohmen-Pao, chairman of BW Group, said: “Sale and leaseback deals have become increasingly prevalent for ship financing. Efficient transactions depend on clear term sheets, which provide the foundation for final documentation. Shiplease provides a better starting point for the parties to begin their negotiations and to arrive quickly at a result that is fair for everyone.”
Sale and leaseback structures have benefits for both shipowners and leasing companies, and the drafting committee focused on developing a standard which is useful for all parties involved, BIMCO said.
Wilson Liu, senior director at Minsheng Financial Leasing, said: “There are quite a number of newcomers in the market and having an industry-standard is, therefore, a useful starting point. The term sheet will also facilitate the process for more experienced players.”
Shiplease accompanies BIMCO’s two existing term sheets for bilateral and syndicated term loan facilities, ‘Shipterm’ and ‘Shipterm S’. The forms have the same structure, are ‘indicative’ and allow the parties to adjust the term sheet to fit their circumstances. Shiplease applies to both operating and finance leases.
The drafting committee is composed of Alexandros Laios of Navios Corporation, Catherine Smith of Wah Kwong, Conor Warde of Mayer Brown, Jia Zhang of China Development Bank Leasing, Jay Shi of China Merchants Bank Financial Leasing, Lawrence Chao of Island Navigation, Matt Hannaford of Hannaford Turner LLP, Olga Petrovic of Linklaters LLP and Shen Zhao of CSIC Leasing.
Shiplease will be made available on BIMCO’s secure contract editing system SmartCon and the term sheet will be accompanied by explanatory notes.
BIMCO says it has around 1,900 members in more than 120 countries, representing 59% of the world’s shipping tonnage. Its global membership includes shipowners, operators, managers, P&I Clubs, brokers and agents. BIMCO is a not-for-profit organisation.