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PR Newswire
27-10-2014, 11:08 PM
CHARTER DEFAULT INSURANCE CAN PROVIDE AN ADDITIONAL LEVEL OF SECURITY TO A LENDER
APPLICATIONS
While ship owners use charter default insurance to protect revenue, ship finance organisations may view it as important security for their own credit position.
Charter default insurance can be instrumental in building support for the raising of capital or investment through a bond issue, stock listing, finance lease, private equity or KG type finance. In 2011 a prominent analyst identified the support that charter default insurance provides as a major factor underpinning the stock price over-performance of one listed shipping company relative to its peers.
Charter default insurance can also be used in mortgage-backed ship finance, either to encourage a lender to provide a loan or to improve the terms of lending,
including pricing. The cost of charter default insurance might be absorbed, in whole or in part, by the saving in the cost of lending achieved by credit rating arbitrage between the charterer and an insurer.
Transferring counterparty credit risk to insurers rated ‘A’ or better may enable banks to offset the stricter capital requirements expected to be imposed under Basel 3 and should have a positive impact on the cost of lending.
When ship finance is in short supply, the additional security provided by insurance may help persuade a lender to reach a positive credit decision. The premium might be a necessary cost of securing finance.
In short, charter default insurance may help enhance financing terms or even unlock financing that would otherwise be unavailable.
http://uk.marsh.com/Portals/18/Documents...202012.pdf
(vested)
APPLICATIONS
While ship owners use charter default insurance to protect revenue, ship finance organisations may view it as important security for their own credit position.
Charter default insurance can be instrumental in building support for the raising of capital or investment through a bond issue, stock listing, finance lease, private equity or KG type finance. In 2011 a prominent analyst identified the support that charter default insurance provides as a major factor underpinning the stock price over-performance of one listed shipping company relative to its peers.
Charter default insurance can also be used in mortgage-backed ship finance, either to encourage a lender to provide a loan or to improve the terms of lending,
including pricing. The cost of charter default insurance might be absorbed, in whole or in part, by the saving in the cost of lending achieved by credit rating arbitrage between the charterer and an insurer.
Transferring counterparty credit risk to insurers rated ‘A’ or better may enable banks to offset the stricter capital requirements expected to be imposed under Basel 3 and should have a positive impact on the cost of lending.
When ship finance is in short supply, the additional security provided by insurance may help persuade a lender to reach a positive credit decision. The premium might be a necessary cost of securing finance.
In short, charter default insurance may help enhance financing terms or even unlock financing that would otherwise be unavailable.
http://uk.marsh.com/Portals/18/Documents...202012.pdf
(vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
