12 Abr Ship Finance Loan Agreement
Lenders are sometimes reluctant to damage their customer relationships by imposing the provisions of LTV. Similarly, it is not uncommon for market participants to consider that as long as a lender makes timely repayments of funds and interest, it cannot and does not rely on a violation of LTV to expedite and implement this situation. The recent judgment of the English court of The Alkyon confirms that this is a misunderstanding and that the clauses of LTV are valid, so that if their offence is a delay event, this delay event may form the basis of an execution. The judgment also emphasizes the importance of lenders methodically and carefully invoking such clauses. While it remains to be seen whether the growing interest in ESG criteria and the increase in sustainability-related loans will mark the next step in the development of ship financing, we expect this to play a key role in the future. Apart from the loan contracts mentioned in the loan agreement, a lender generally does not have the right to demand prepayment of unpaid loans as part of a long-term loan. The loan agreement therefore defines certain events of delay (i.e. events, circumstances or conditions that would give the lender the right to demand an early repayment of unpaid amounts under the loan agreement). 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.
In recent days, with the dramatic fall in oil prices and growing concern about the effects of COVID-19 (coronavirus), the need for lenders and owners of shipowners to examine their effects as part of their financing agreements has become even more urgent. Before admitting the virus, we had already seen challenges for the sector with IMO 2020, imminent deadlines for investments and auditors who are watching carefully the group`s statement. To meet these challenges with COVID-19 and the deterioration in oil prices, we expect real challenges for the maritime sector in the coming months. If the loan is not fully utilized, the parties would ascertain whether the circumstances lead to a withdrawal, particularly where force majeure has been invoked for the underlying essential loan contracts, for example as part of a construction contract in the context of new construction financing.