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Led by Penelope Smythe-Bottomley Simulacrum
The shipping finance specialism of the maritime series, following the coverage of the Institute of Chartered Shipbrokers' Shipping Finance syllabus. Eleven modules cover how ships are paid for — the nature of the business and the shipping cycle, the lender's perspective and security, equity, debt and bonds, alternative sources, loan types, securitisation, the KS and KG structures, the Basel framework, Islamic finance, and the legal issues. No calculation required; the emphasis is on relating every instrument to the cyclical nature of shipping. Led by the Penelope Smythe-Bottomley Simulacrum, with equity taught by Aristotle Onassis and the legal issues by Lord Mansfield.
Led by Penelope Smythe-Bottomley Simulacrum
The question
Every financing decision is made somewhere on the boom-to-bust wheel — so do you understand the shipping cycle and what lenders and borrowers each want? Taught by Penelope Smythe-Bottomley, this module covers the setting: the objectives of lenders and borrowers and their areas of consensus and conflict; the basic features of the shipping cycles from boom to bust and their implications for the financing decision; the historical and economic context of ship finance; the principal sources of lender security; and, through case studies, the consequences of failing to account for the cycle phase.
Outcome
You can relate a financing scenario to the phase of the shipping cycle and the objectives and security of the parties. (The nature of the shipping business)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
Good lending rests on the asset, the cash flow, and the name — so how does a banker secure a ship loan against default and falling values? Taught by Penelope Smythe-Bottomley, this module covers the lender's view: the principles of good lending; ship mortgages and their importance, the mortgagee's rights on default (with case studies), the standard mortgage terms and indemnities; the assignment of insurances and earnings, charges over shares, and parent guarantees; the crucial importance of value-maintenance clauses; lenders' credit-risk analysis (the six "C"s); and the special-purpose company.
Outcome
You can identify the security a prudent lender would take on a loan and the role of the value-maintenance clause. (The lender's perspective)
Sub-units
Led by Aristotle Onassis Simulacrum
The question
Shipping and the outside investor have always made an uneasy marriage — so why has equity been hard to attract, and how do owners list and raise it? Taught by Aristotle Onassis, who raised capital as a shipowner, this module covers equity: the historical reasons external equity has been difficult to attract (volatility, secretiveness, single-ship companies, arrest/jurisdiction); the owner-investor conflicts and their resolution and the reasons for multiple listings; the main exchanges (NYSE, Oslo Bourse, NASDAQ) and the implications of Sarbanes-Oxley 2002; the types of shares and their advantages and disadvantages; and private placements, private equity, and the principles of public offerings and IPOs.
Outcome
You can reason about the obstacles, the listing choice, and the equity instrument suited to a shipping company seeking external capital. (Equity as a source of finance)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
Interest must be paid; dividends need not — so how does that distinction shape financing, and what makes the convertible bond so interesting? Taught by Penelope Smythe-Bottomley, this module covers debt and bonds: the differences between debt and equity (mandatory interest versus discretionary dividends); the forms bonds may take and the function of sinking funds; the structure and purposes of convertible bonds, the attractions of conversion for issuer and investor, the cycle-timing of conversion and the one-way prohibition of re-conversion; and the use of high-yield bonds.
Outcome
You can reason about debt versus equity and the role and timing of a convertible bond for a financing need. (Debt financing and the bond markets)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
The bank loan and the bond are not the only ways to pay for a ship — so what do the yard, the state, and the lessor offer? Taught by Penelope Smythe-Bottomley, this module covers the alternatives: the principles and characteristics of shipyard credit; the principles, structure, and purpose of government subsidies; the role and importance of export credit agencies; and the principles, structure, and use of finance leasing and operating leasing.
Outcome
You can identify which alternative source might suit a financing situation and its structure. (Alternative sources of ship finance)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
A loan's shape must fit the cash flow the ship will earn across the cycle — so do you know the plain vanilla, moratorium, bullet, and balloon structures, and why loans are syndicated? Taught by Penelope Smythe-Bottomley, this module covers the loan structures: the parties' objectives; the characteristics of the different loan types (plain vanilla, moratorium, bullet, balloon, back/front-ended, revolving credit facility) and how each shapes repayment; the rationale for syndicating a loan and the responsibilities of the parties; and the structure and use of mezzanine finance.
Outcome
You can reason about the loan structure that would suit a given cash-flow profile. (Types of loans used in shipping finance)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
How are a fleet's future earnings turned into present capital? Taught by Penelope Smythe-Bottomley, this module covers securitisation: the basic objective (bundling homogeneous cash flows as collateral for a bond issue, so capital is raised against the cash flows rather than the company); the basic structure and the role of all participants (originator, special-purpose vehicle, investors, servicer); the procedural steps; and the objectives of shipowners in the securitisations described in the case studies.
Outcome
You can reason about how a securitisation of shipping cash flows would be structured and why an owner would use it. (Securitisation)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
Two national tax-driven structures financed much of the world fleet — so what are the German KG and the Norwegian KS? Taught by Penelope Smythe-Bottomley, this module covers them: the German government policy rationale for KG financing; the structure of a typical KG financing and its principal advantages, with case studies; the Norwegian KS system, the similarities between KG and KS, and the structure of a typical KS financing; and an awareness of new finance products such as baby bonds.
Outcome
You can reason about the KG or KS structure and its tax-driven rationale for an investor-pooling financing. (KS and KG ship financing)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
How much of a shipping company should be debt and how much equity — and how do the Basel rules constrain the banks that lend to it? Taught by Penelope Smythe-Bottomley, this module covers the capital structure: the history, purposes, and composition of the Basel Committee; the effects of the Basel regulations on shipping finance and the significance of the capital-adequacy ratio; the basic composition of the ratio in terms of tiers and asset weighting; and the principle that the debt-equity mix is not a static structure but shifts with the cycle.
Outcome
You can reason about the effect of Basel and the dynamic debt-equity mix in a lending or capital-structure situation. (Significance of the debt-equity structure)
Sub-units
Led by Penelope Smythe-Bottomley Simulacrum
The question
Shariah principles forbid interest and require finance tied to real assets and shared risk — so how do Islamic instruments finance a ship? Taught by Penelope Smythe-Bottomley, this module covers Islamic finance: the basic principles (the prohibition of interest, the linkage to real assets, the sharing of risk); the characteristics of the principal Shariah-compliant instruments found in shipping finance — Mudharabah (profit-sharing partnership), Murabaha (cost-plus sale), Ijara (lease), and Sukuk (asset-backed certificates); and the main components of the case-study structures.
Outcome
You can reason about which Shariah-compliant instrument would meet a financing need and how it avoids interest. (Islamic finance in shipping)
Sub-units
Led by Lord Mansfield Simulacrum
The question
All ship finance rests on legal foundations — so do you know the registry, the mortgage priority, the power of arrest, and the arbitration that secures the financier? Taught by Lord Mansfield (and developed fully in MAR 1014), this module covers the legal issues from the financier's standpoint: ship registry, the corporate veil, and the one-ship company; mortgage priorities (legal versus equitable, registered versus unregistered) and the maritime liens and mortgages conventions; admiralty jurisdiction and costs, the arrest in rem procedure and the Brussels Arrest Convention 1952, and freezing orders; and the arbitration framework (locations, the English Arbitration Act 1996, LMAA and SMA terms, the English court structure).
Outcome
You can identify the legal issue — registry, mortgage priority, arrest, or arbitration — that bears on a ship-finance security question. (Legal issues in shipping finance)
Sub-units