BIMCO has developed a new standard term sheet for syndicated ship financing (SHIPTERM S) – the first industry standard of its kind for syndicated loans. The term sheet was approved for publication at BIMCO’s biannual Documentary Committee meeting on May 2 in New York.
“Big financial institutions have their own term sheets that aren’t specifically designed for shipping loans and are often very complex; while small to medium sized banks often don’t have a form to use at all. This makes it difficult and time consuming for shipowners to make comparisons between loan offers from banks. SHIPTERM S solves this problem by providing a clearly written but simple standard format term sheet that will appeal to small to medium sized shipowners and banks alike,” says Francis Sarre, Chair of the BIMCO Documentary Committee.
A term sheet is a short version of a full loan agreement used by the negotiating parties to settle on the key terms such as base rate, repayment profile and maximum loan amount. The term sheet is passed along to the relevant legal team and serves as a foundation for a full contract, that normally runs for more than 100 pages. A syndicated loan is provided by a group of lenders, as opposed to bilateral loans between one lender and one borrower.
The development of the term sheet was triggered by BIMCO’s Asian members and by Asian banks, as syndicated financing of ships is now more common in Asia than in Europe. European banks are increasingly more focused on providing bilateral loan agreements.
“I think a standard term sheet specialized for syndicated ship financing will be a very useful tool,” says Julien Pierret, Director Export & Specialized Finance at HSBC.
The advantage of a standard term sheet is, that shipowners can reduce the time and effort spent on understanding terms provided by different banks and it can make the terms easily comparable.
The banks on the other hand benefit from a set of clearly written “standard” terms for ship loans which include provisions for hazardous material recording and safe and environmentally sound recycling, which are important elements for modern financial institutions.
“The inclusion of terms on ship recycling and hazardous materials was key for the banks we collaborated with and it demonstrates the importance of these topics to the financial world,” says Sarre.
BIMCO consulted with more than 100 banking, legal and ship owning stakeholders to develop the syndicated term sheet.
The Syndicated Term Sheet complements the existing BIMCO term sheet for bilateral ship financing, named SHIPTERM.
The new term sheet for syndicated ship financing is available here.