SHIP MANAGEMENT TERM PAPER-

INTERVIEW
1) What are the limitations and challenges of shipping
companies when considering for shipping finance?
 Shipping, like airline and real-estate, has
industry-specific limitations for financing.
Predictable profits, stable business
environment, well-structured financial
statements and well-defined corporate
structure are appealing attributes for
banks to finance a company. Nevertheless,
shipping companies are hardly compatible
with these measures.
 Main asset which is ship is not a staying at its
place asset, which means that the collateral is
itself highly mobile. Furthermore, ownership
structure is not standard in the industry and is
quite variable. In this case, banks need further
investigation to lend and often require additional
collaterals. Many industry consist of formal
corporate structures unlike shipping industry.
However, banks like reliable, predictable clients.
 Furthermore, shipping companies are generally
family-owned in Turkey. Ownership structure is
not well-structured. Besides, there is a
conservative perception on financing and re-
tuning of company structure. Banks also need
further investigation to lend and often require
additional collaterals. Many industry consist of
formal corporate structures unlike shipping
industry. However, banks like reliable,
predictable clients.
2) From what external sources do shipping
companies obtain financing in Turkey?
Banks supply capital to shipping companies
through these ways:
Mortgage-backed loan
Corporate loan
Shipyard credit
 In terms of local resources, shipping companies
have been providing financing from state-owned
banks for a long time. Primary financial
institutions have been limited number of state-
owned banks. Commercial banks engage in
operational financial tasks required for daily
business for shipping companies.
 International sources are generally off-shore or global
investment banks. These are giant financial institutions
based in Sweden, London and other European
countries. Seb Group, DVB Bank, Citi Group are a few
examples of these companies. Sectoral volatility, non-
transparency, international jurisdictional conflicts and
high capital intensive structure are the main reasons
for avoidance of external debt for shipping companies.
Besides as a shipping company in Turkey, domestic
economic and political conditions are also considered
for loan decisions.
 As internal financing options, shipping
companies go initial public offering, issue bonds,
participate in M&A or lease.
3) What are the considerations of banks to
lend shipping companies?
The folowing questions are examined to assess
the commitment of the shipping company to the
industry:
What is the experience level of employees?
Has the company been a profitable ship operator?
Has the company ever run into trouble? If so why, and was the trouble
avoidable? Did it survive and has it learned lessons?
Do control systems exist and are they effective?
Is integrity taken seriously?
Is there a formalised management system with regular meetings, written
reports, targets ?
Are they likely to liaise in a timely manner with their banks?
What is the corporate structure of the shipowner? Is it a state-owned, private or
family owned shipping company?
What trade does the shipowner operate in: Oil, liner (i.e., containers), bulk,
inter-island, tramping, passenger, offshore drilling?
What is the managements appetite for risk? Does it have ambitions and are
they realistic?
The folowing questions are examined to assess
the operating risk of the shipping company

What is the present and future trade pattern for that type of ship?
What are the daily running costs? Is there an excess capacity?
What are the conditions of countries within the ships trading
range ? (political, economic)
What is the supply and demand situation for that type of vessel?

What do the vessels trading records reveal, if second-hand? Is

she often under repair? Is the vessel black-listed from any ports?
If there is, what is the creditworthiness of the charterer or
shipper ?
The folowing questions are examined to assess
the financial condition of the shipping company

Do the shareholders have other cash or

convertible securities that can be placed with the
bank? Do members of their family have deposit
accounts that can be moved to the bank? Can
equity be raised from other sources?

How much equity will shareholders invest in the

project?
The folowing questions are examined to assess
the collateral condiiton of the shipping company

What is the market value of the vessel being

constructed/purchased? What is the expected future
market value for vessels of this type?
Does the flag afford reliable and well-tested security? Is it
complicated to register and de-register the ship mortgage?
What is the creditworthiness of the guarantor? Will it
support its guarantee with sister ship mortgages or other
security?
Can the shipowner supply assignments of charges of
shares or cash collateral or mortgages of other assets such
as real property ?
4) Is there any government incentives for
shipping finance in Turkey?
 Turkish Export Credit Agency (Trk Eximbank)
launched Shipbuilding Finance and Guarantee
Program. Maximum credit amount is 85% of
total contract amount.
The following colaterals are expected: letter of
guarantee from a private Turkish bank or
Treasury bills and government bonds.