Since the vessel is an expensive asset, exposed to a large number of risks during operation and is normally the lender`s primary guarantee (due to the mortgage on the vessels), the lender intends to ensure that the vessel is adequately insured and operated. As a result, most ship credit contracts will have significant vessel-specific obligations, some of which relate to ship`s insurance agreements and others to the operation of the vessel. Other important conditions include all commissions that could be paid to the lender (although these can be defined separately in confidential commissions when the loan is syndicated), the interest rate (generally expressed in terms of margin above the interbank rate or lender`s financing fees) and availability of resources. One of the most notable changes in shipping in recent years has been the growth of secondary trade in ship loans. In this regard, we expect existing lenders to want to withdraw and newcomers to actively seek to buy back loans, either as portfolio sales or as individual transactions. This can be a particular concern for shipowners and restrictions on the borrower`s transfer and approval fees are generally removed when a default persists. Unlike most other asset classes, the operation and navigation of a vessel in international trade exposes it to risks. Therefore, the terms of the loan agreement will require the borrower to maintain appropriate insurance for the vessel. The type of insurance depends, among other things, on the nature of the vessel, its use and where it is used. A delivery credit contract can be divided into three elements: (1) the terms of sale; (2) the main operational provisions; and (3) the clauses of the boiler platform. The following discussion is based on a bilateral credit contract between a lender and a borrower; Shipping loans by club or correspondence are the subject of further consideration beyond this chapter. Buying and selling a portfolio of loans on board is a complex process.
However, continued pressure on banks to reduce their exposure to the maritime industry and the opportunities offered by assets at historic lows mean that banks and new entrants remain highly motivated to agree on agreements. Therefore, the lender`s loan obligation is its only essential obligation and, for the lender, the loan agreement will focus on how the loan is made and how the lender handles the borrower`s information. On the other hand, the obligation for the borrower to repay the loan is supplemented by other obligations to safeguard the lender`s security and to inform the lender about the borrower, the borrower`s activities and the operation of the vessel. The loan contract includes the insurance companies with which the borrower undertakes to insure the vessel for certain types of risks and, for some insurance, the minimum amount for which the vessel should be insured. This minimum amount is generally related to the agreed value of the vessel, which is determined by the valuations that the borrower is expected to obtain on an annual or semi-annual basis (often by brokers who have been the subject of a prior agreement with the lender). Ships are mobile goods necessary to maintain a national character. Overall, this means that they must be registered with a nation-state. Each state maintains its own public register of navigation (or registry), which generally covers property and security interests (including mortgages) through vessels registered in that state.