News

2020 September 22 11:49

BIMCO adopts the industry’s first ship sale and leaseback standard

Sale and leaseback transactions have seen a substantial increase in recent years as an alternative method of ship financing, and BIMCO has adopted a new term sheet which will facilitate the negotiation of sale and leaseback deals and make the process cheaper for parties involved, BIMCO said in its release.

Responding to the changes in the ship financing landscape, BIMCO’s Documentary Committee has adopted the new term sheet, SHIPLEASE, which is developed for sale and leaseback transactions involving second-hand ships but can be readily adapted for newbuildings. SHIPLEASE will be available in the coming days.

The bulk of sale and leaseback transactions originate in Asia and SHIPLEASE was therefore developed by an Asian-based drafting committee involving major shipping and ship leasing companies and law firms. It creates a balanced standard – an industry first – based on which the parties can conduct the negotiations. Nick Fell, Executive Vice President, Corporate Services and General Counsel of BW Group chaired the drafting committee.

“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,” says Andreas Sohmen-Pao, Chairman of BW Group.

Sale and leaseback structures have benefits for both shipowners and leasing companies, and the drafting committee has focused on developing a standard which is useful for all parties involved. Wide industry consultation was carried out to ensure that the form reflects market practice. The result is a ‘one size fits all’ form which the parties can adapt to fit their needs.

“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,” says Wilson Liu, Senior Director at Minsheng Financial Leasing.

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 in nature and allow the parties to adjust the term sheet to fit their individual transaction. SHIPLEASE is applicable to both operating and finance leases.

SHIPLEASE will be made available on BIMCO’s secure contract editing system SmartCon and the term sheet will be accompanied by explanatory notes.