A guarantee consortium involving parties associated with – and including the – Bareboat Charterer is set up and the appropriate financial disclosures are made. The Guarantee Consortium is insured to the benefit of the Tax Lease company and its constituent members for the entire period up to date where Bareboat Charterer declares option of purchasing the vessel. The premium is paid by the Guarantor. A legal due diligence procedure is carried out, in particular addressing the bankruptcy procedures that apply under the local laws of the Guarantor. Since insurance must normally be provided ahead of the delivery of the vessel, a proportion of the premium is prepaid and retained as a capacity charge.
Scope:
Under some circumstances insurance products can solve problems related to financing. One such example relates to the guarantee required from the Bareboat Charterer under a Tax Lease Structure.
Applies to:
Operators not having the Balance Sheet required to support a joint and several guarantee under a Tax Lease or similar structure, who are also willing to support the guarantee with other non-financial assets.
How it works:
A guarantee consortium involving parties associated with – and including the – Bareboat Charterer is set up and the appropriate financial disclosures are made. The Guarantee Consortium is insured to the benefit of the Tax Lease company and its constituent members for the entire period up to date where Bareboat Charterer declares option of purchasing the vessel. The premium is paid by the Guarantor. A legal due diligence procedure is carried out, in particular addressing the bankruptcy procedures that apply under the local laws of the Guarantor. Since insurance must normally be provided ahead of the delivery of the vessel, a proportion of the premium is prepaid and retained as a capacity charge.
Markets:
Lloyd's
Price Range:
0.50% - 1% depending on structure
Self Retention:
None
Time to market:
Up to 90 days.
