It is said that BIMCO is reacting to the booming ship sale and leaseback market by developing a standard term sheet for use by shipowners; leasing companies and lawyers.
The second meeting of the drafting committee developing the new standard took place at the offices of BW Group in Singapore, on Monday, January 13 and Tuesday, January14.
Drafting work is carried out based on BIMCO’s two term sheets for bilateral and syndicated ship financing, SHIPTERM and SHIPTERM S, which are being adapted to fit sale and leaseback transactions.
The new term sheet aims to cater for both financing and operating leases and will cover the sale and purchase of the ship and the bareboat charter of the ship.
It is said that work is expected to continue when the drafting committee meets again on 17-18 March, this time at Wah Kwong’s offices in Hong Kong.
Once the draft is ready, it will be distributed for wider industry consultation.
Nick Fell, Executive Vice President, Corporate Services and General Counsel of BW Group and chairperson of the drafting committee in charge of the work commented that “it is extremely important for us to get input from experts in the market to make sure that the term sheet BIMCO publishes reflects practice and is acknowledged as a fair and balanced starting point for the parties’ negotiations.”
There has been a steep increase in sale and leaseback transactions over the past decade. Still, this is an area where stakeholders approach certain elements of sale and leaseback transactions quite differently. It is therefore vital that BIMCO develops a standard which is representative of how stakeholders manage these transactions.
The drafting committee consists of Alexandros Laios of Navios Corporation; Catherine Smith of Wah Kwong; Conor Warde of Mayer Brown; Jia Zhang of China Development Bank Leasing; Jay Shi of China Merchants Bank Financial Leasing; Lawrence Chao of Island Navigation; Matt Hannaford of Hannaford Turner LLP; Olga Petrovic of Linklaters LLP; Shen Zhao from CSIC Leasin, and Wilson Wei Liu of Minsheng Financial Leasing.
It was in 2017 when leasing companies were tightening their stranglehold over container equipment ownership, as ocean carriers were cutting back on new purchasing and sell older inventory for leaseback. Yet, the lessors’ rapid expansion had come at a price as the combination of low borrowing costs and competitive pressures had had an adverse impact on lease rates and accompanying investment returns.