Subject Delivery and Assessment Plan

Part A
1. 2. 3. Subject title: ITL04TSF Techniques and Instruments of Ship Finance Name of the Lecturer Trevor Law Subject description, learning outcomes and syllabus: (subject scheme

supplied)
Description

The aim of this course unit is to examine the methods of finance for the shipping industry with a strong emphasis on the practical elements and decisions supporting the provision of finance. Key to the approach is the identification of risks and the active management and mitigation techniques employed by the providers of finance. This also involves understanding the cash flow of shipping companies and how they are generated, which in turn requires examination of the sources of revenue and associated costs required to maintain the trading effectiveness of the vessel(s) or subjects financed. For financial and business decision making, the examination of cash flows and consequential analyses underpins an essential consideration in the repayment of financial obligations. The series of lectures will additionally consider the availability of sources of capital for shipping companies to finance their decisions in combination with bank finance and the examination of alternative sources of capital. Some emphasis will be attributed to finance re-structuring in times of significant market deterioration. Finally, consideration will be given to the key factors leading to investment decisions in the industry, returns and risks of assets and policies for managing the business risks through traditional methods and modern financial derivative instruments.
Learning Outcomes:

By the end of the subject the student should be able to: 1. Understand the different sources of ship finance. 2. Appreciate the key elements in structuring a financing opportunity. 3. Learn the importance of cash flow lending. 4. Analyse the different business risks confronting providers of shipping finance. 5. Understand the traditional methods of shipping risk analysis and management. 6. The use of mitigation techniques e.g. hedging and treasury instruments. 7. Consider the significance of maintaining value in shipping facilities. 8. Evaluate the practical outcomes in recovering outstanding debt in a distressed situation.
Syllabus

The following aspects will be covered: 1. Sources of capital in shipping finance. 2. Different forms and types finance in shipping finance. 3. Key elements in arriving at an acceptable financing structure. 4. Cash flow analysis and the maintenance of security value. 5. Shipping risk management and the ongoing measurement of shipping/finance risks and mitigation techniques. 6. The impact of capital in the international shipping finance environment.

Part B
1.

Teaching methods
Classroom activities: Lecturing: 70%, discussion: 20%, workshops 10%. Out class activities: Reading: 100% Class equipment required: computer/projection for PowerPoint presentations and white board.

2.

Handouts for students

Textbook (relevant pages) Yes, Exercises Yes (will be given in class), pre-reading list: Yes, power point presentations: Yes
3. Assessment plan

Assessment methods
1 2

Written examination Class presentation

Yes or No Yes Yes

Weighting % 90 10

Note Class participation in discussions and workshops

4. Textbook and reference readings

Teaching plan

1. 2. 3. 4.

Types of Finance Tailoring facility types to the financing project. Recognising the elements of recourse. Introducing trigger mechanisms to maintain value. Layering different forms of debt provision. Senior, junior and mezzanine finance structures Dealing with sub-ordinated positions How is risk and reward balanced? Financing Criteria of a Bank Is a shipping finance policy a good thing for a lender? Issues in lending to different borrowing structures. Flexibility conditioned by timing? Competitive problems

Assessment of security mechanisms Assessing the value in facility structuring Impact on facility monitoring Jurisdiction issues Practical review of the risks involved in New Building finance Evaluating differences in security.

5.

 The value of Refund Guarantees. Recourse outside the Exim structure. 6.

Structuring Ship Finance Projects (class discussion) Aspects of balance sheet lending Lending against projects Assessment of security mechanisms Assessing residual value risk Pitfalls in Cash Flow Lending How to maintain value in a cash flow compilation Who is your primary obligor? Assessing employment success. Working capital adequacy.

7. 8.

Lending against Projects The concept of industrial shipping! Interpreting value in the structure Analysing key shipping inputs Monitoring portfolio risks Apportionment of equity to different vessel types and shipping sectors The role of Agent and funding for portfolio management Requirements of host regulators Practical use of risk rating models (in decision making) How do banks use risk rating models The practical application of risk rating tools in banking. The impact of increased regulatory involvement Enforcement of Security Principles of facility re-structuring. Nature and timing of problem How to deal with multiple lenders.

9.

10.

11. 12.

Workouts Decision to foreclose, scrap or continue trading. Operational and technical considerations Providing protection from third parties

6. Class activities and teaching plan Notes: This plan is subject to possible adjustments during the delivery (A session is 90 minutes class contact, three such sessions are scheduled every day)

Day

Sessions

Topics Types of Finance Tailoring facility types to the financing project. Recognising the elements of recourse. Introducing trigger mechanisms to maintain value. Layering different forms of debt provision. Senior, junior and mezzanine finance structures Dealing with sub-ordinated positions How is risk and reward balanced? Financing Criteria of a Bank Is a shipping finance policy a good thing for a lender? Issues in lending to different borrowing structures Flexibility conditioned by timing? Competitive problems Assessment of security mechanisms Assessing the value in facility structuring Impact on facility monitoring Jurisdiction issues

Activities Lecture and Discussion

1 2

Lecture and Discussion

Lecture

Lecture and Discussion

Practical review of the risks involved in New Building Finance Evaluating differences in security. The value of Refund Guarantees. Recourse outside the Exim structure. Structuring Ship Finance Projects Aspects of balance sheet lending Lending against projects Assessment of security mechanisms Assessing residual value risk Pitfalls in Cash Flow Lending How to maintain value in a cash flow compilation Who is your primary obligor? Assessing employment success. Working capital adequacy Lending against Projects The concept of industrial shipping! Interpreting value in the structure Analysing key shipping inputs

Lecture

Class Discussion and Breakout Groups

Lecture and Discussion

Lecture and Discussion

Monitoring Portfolio Risks Apportionment of equity to different vessel types and shipping sectors The role of Agent and funding for portfolio management Requirements of host regulators Practical use of risk rating models (in decision making) How do banks use risk rating models The practical application of risk rating tools in banking. The impact of increased regulatory involvement Enforcement of Security Principles of facility re-structuring. Nature and timing of problem How to deal with multiple lenders. Workouts Decision to foreclose, scrap or continue trading. Operational and technical considerations Providing protection from third parties

Lecture

Lecture

2 3

Class Discussion and Breakout Groups

Lecture and Discussion

Lecturer: ___Trevor Law____,

Date: __December 2012______________