Overview
Preparation of comprehensive term loan proposal for financing acquisition of a second-hand Handymax bulk carrier vessel. The project involved vessel technical due diligence, market analysis, financial projections, and structuring a bankable loan proposal for presentation to financial institutions for ship acquisition financing.
Client
An established shipping company planning to expand its bulk carrier fleet by acquiring a 10-year-old Handymax vessel (50,000 DWT). The client required professional assistance in preparing loan documentation, conducting vessel due diligence, and developing financial projections to secure debt financing from banks.
Challenge
The challenge was to structure an attractive loan proposal addressing bank concerns about freight rate volatility, vessel value risk, and operational cash flows. Key requirements included comprehensive technical assessment of the vessel condition, market analysis demonstrating sustainable freight rates, detailed financial modeling with sensitivity analysis, and preparing documentation meeting bank's due diligence standards.
Methodology
The loan proposal preparation involved vessel technical inspection with classification society records review, machinery condition assessment, and remaining useful life evaluation. Market analysis covered Handymax freight rate trends, trade route analysis, and employment outlook. Vessel valuation obtained from multiple independent ship brokers. Financial projections developed for 10-year loan tenor incorporating vessel earning assumptions, operating costs, loan amortization, and cash flow analysis. Risk assessment covered market risks, operational hazards, and mitigation strategies including time charter backups and adequate insurance coverage.
i-maritime Proposition
i-maritime prepared comprehensive loan proposal for USD 15 million acquisition (vessel value USD 20 million, 75% LTV). Financial structure included 10-year term loan with 2-year moratorium on principal repayment, enabling cash flow stabilization. Debt Service Coverage Ratio (DSCR) projections showed 1.3-1.5x coverage under conservative freight rate assumptions. Employment strategy combined 3-year time charter contracts (providing stable base cash flows) with spot market exposure for upside. Technical due diligence report confirmed good vessel condition with recent special survey completion and no major upcoming CAPEX requirements. The proposal addressed bank's risk concerns with detailed covenants including minimum liquidity requirements, insurance stipulations, and quarterly financial reporting. Successfully secured loan approval from leading ship finance bank at competitive interest rates (LIBOR + 250 bps).