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CHAPTER 35 Finance Charters and Leases

Bareboat Charters


Finance Charters and Leases

Loans and leases

35.1 Amongst the principal means by which shipowners have traditionally raised finance to fund the acquisition cost of new or second-hand tonnage are loan and lease facilities made available for the main part by ship finance banks and financial institutions. These two types of facility are directly analogous. A leasing facility is often regarded (in economic terms) as a secured loan to the lessee by the lessor, particularly where the transaction involves a sale and lease-back. Both types of financing involve an advance of a sum of money by a financial institution which is then amortised by instalments (repayment instalments in the case of a loan and rental payments in the case of a lease) over a fixed term, with interest being paid on the advance either as an interest payment (in the case of a loan) or as an element of the rental payment (in the case of a lease).

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