Marine Log - January 2009 - (Page 19)

MARINEFINANCE situations in which you should consider financing. The most critical of these is the refinancing of maturing debt. It is quite common for a financing to have a large or balloon payment due at maturity. Refinancing this payment is generally the preferred method to fund this payment. Refinancing should also be considered if the company’s financial condition or the interest rate environment has improved from the time of the original financing. Such a refinancing may result in improved terms and conditions of your financing arrangements. Refinancing can also be used to consolidate debt. This may reduce the number of your lenders, thus lowering your administrative time and expense. Another potential use of financing is to effectuate an equity buyout. Lastly, and quite importantly, financing arrangements such as lines of credit should be in place to supplement working capital. Without such arrangements, the uncertainty of revenues may inhibit a company’s ability to meet obligations as they come due. Once you have established a need to obtain financing, decisions have to be made as to the method of financing and the source of funding. Possible financing methods include the issuance of debt obligations, leases or equity investments. Funding can come from a variety of sources including: banks, finance companies, lessors, strategic partners, investors, vendors/shipyards and government sources. Government programs are available at local, state and federal levels (i.e. the Maritime Administration’s Ship Financing or Title XI Program provides long term financing with attractive interest rates). Before approaching a lending source you should be aware of their policies and preferences. Some lenders have preferences as to geographic areas, types of equipment, age of equipment, loan amount and length of financing. Therefore, it is critical to approach only those institutions which are capable of funding your project and provide the terms and conditions best suited to your needs. Before approaching any lender, you should determine the key factors to be included in your financing request. These factors would include the term, amortization period, amortization method, collateral to be provided as well as any credit enhancements (i.e. guaranties) that you may be willing to provide to the lender. This information should form the basis for an executive summary to be included in the business plan that you present to the lender. The executive summary should be two to three pages and highlight the key aspects of the transaction. The remainder of the business plan should provide detailed information and analyses in support of the executive summary. Included in the business plan should be a company history, area of operation, recent financial statements, market studies (if available), likely competitive response and most importantly projections of the anticipated cash flow and financial condition for the next three to five years. The projections should be accompanied by the assumptions utilized in developing the projections. It is also advisable to include the rationale for the assumptions. Following the above approach should maximize your chances for obtaining financing on acceptable terms. ML Mitchell Lax ,former Director of the Maritime Administration’s Marine Finance Office, is a financial consultant and principal with Maritime Capital Resource. He can be reached at tel. 410-465-3752; or e-mail: mlax1017@gmail.com ships to dry up. Most of these ships—dry bulkers and containerships—are built at shipyards in Korea, China and Japan. About 50% of all the new ships on order worldwide are dry bulk or containerships. By contrast, CESA says European yards are focused on specialized vessels, such as cruise ships, OSVs, ferries, yachts, dredgers, small- and medium-sized cargo ships, as well as naval and coast guard vessels. These markets have been very profitable in recent years and remain strong. CESA says that despite limited exposure to the dry bulk and containership markets, European yards are facing “irresponsible behavior by banks,” which have withdrawn credit facilities during the construction period. CESA is urgently appealing to banks and policy makers to maintain the availability of working capital for shipyards and is calling on banks not to make industry policies based on over-simplistic market assessments. CESA underlines also that the long-term perspectives in shipping are robust with continued globalization driving transport growth worldwide. Seaborne activities will remain a strong growth market. CESA considers that the resulting global orderbook shrinkage is a necessary correction from a status of unrealistic and unhealthy overordering. This correction comes at a timely moment as it will avoid that more excessive shipyard capacity in Asia is created. http://www.eagle.org

Table of Contents Feed for the Digital Edition of Marine Log - January 2009

Marine Log - January 2009 Contents Editorial Second Thoughts Update Inside Washington What's On Your Hull? That Sinking Feeling Newsmakers Tech News Contracts Wake Up Call From Mumbai Events Security Guide Vietnam Stretches its Portfolio ML Buyer's Guide ML Marketplace Marine Salvage

Marine Log - January 2009

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