BIMCO standard term sheet for ship finance transactions

| Insight

On 9 January 2017 the Baltic and International Maritime Council (BIMCO) launched a new product codenamed SHIPTERM, a standardized term sheet intended for bilateral, secured term loan ship financing transactions.

The term sheet has been drafted with the support of a subcommittee consisting of maritime specialist from a wide range of ship-owners, banks and lawyers with the intention to reflect current market practice, predominantly in the London market. The standard follows the usual BIMCO pattern with a Part I box layout where the parties will enter the various information (with references to the relevant clauses in Part II); a Part II consisting of the standard terms and conditions; and annexes where the parties can add relevant additional information as needed.

Scope

SHIPTERM is intended for use in transactions between a single lender and one or more affiliated borrowers, which excludes syndicated financing.  The term sheet is only applicable to term loans and not to other forms of bilateral financing such as working capital or revolving credit facilities. These factors limit the scope of application.

Content

The term sheet covers the essential elements of a term loan, but clauses that are typically subject to specific negotiations (i.e.  securities, representations and warranties, information and financial covenants, events of default and conditions precedent) are deliberately not made exhaustive. The term sheet will in most cases need to be further negotiated, amended or supplemented depending on the jurisdictions in which the parties are situated, the governing law and the nature of the transaction.

Application

Most of the banks operating in the shipping market have their own term sheet templates that include their specific requirements and require less tailoring. SHIPTERM in its current form is unlikely to replace these templates in practice. For small or medium sized banks and ship-owners, with limited experience with ship finance transactions, SHIPTERM can be a useful checklist, but should not replace qualified assistance in more complex transaction negotiations.