In the last years, Environmental Social and Governance ("ESG") performance has become more important in the shipping industry. This results not only from the increasing number of regulations that shipping companies and operators have to comply with at different stages of their ships' lifecycle (e.g. from the decreased IMO global sulphur cap on fuel under MARPOL Annex IV, which now stands at 0.5%, to the new IMO Energy Efficiency Design INDEX, which require new ships to comply with minimum mandatory energy performance levels) but also from international initiatives and market trends.
This is beginning to have an impact on how lenders and other investors assess the creditor risk of the companies they consider lending to or investing in. Therefore, having started from evaluating and decreasing their environmental footprint, ship owners are now developing ESG strategy plans to improve their ESG performance, which will increase their chances to access financing and investments.
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How we can help
While the Loan Market Association has developed some guidelines for green loans or sustainability linked loans, these guidelines are not tailored to the ship finance market and there are no template provisions to insert into loan agreements.
We can help ship finance lenders adapt their traditional loan documentation if they wish to make a green or a sustainability linked loan available to one of their borrowers. As part of this process, we will advise our clients on the appropriate definitions, condition precedents, representations, undertakings and event of defaults to reflect the purpose of the loan and/or the ESG strategy of the borrowing group. We can also advise shipping lenders on other shipping-specific representations and covenants relating to the use and implementation of the Poseidon Principles and ship scrapping.
We can also prepare bespoke documentation for a particular borrowing group that wishes to ensure consistency across their loans to their ESG targets, representations and covenants.
We are happy to provide some training on the top of green and sustainable finance in shipping on demand to our clients.
As a full service shipping department, we are able to advise and support our clients on every element of the shipping lifecycle, including assisting charterers and shipowners in relation to operations, while adhering to IMO regulations and their own company objectives in support of shipping decarbonisation.
We understand the demands of international seaborne trade and have the knowledge and skills to assist you with the full spectrum of shipping work – from contract drafting to negotiations, through to disputes.
Our team partnered with and advised the Global Maritime Forum (GMF) on the creation of The Sea Cargo Charter, which aspires to set a new benchmark for transparent climate reporting, and improved decision-making in line with the United Nations decarbonisation targets.
Our team has provided training and talks on the carriage of goods by sea, the IMO regulations and shipping decarbonisation and would be happy to offer bespoke sessions to our clients in the future.
Experience
Acquisition of innovative eco-type barges
We advised J.P. Morgan Asset Management on the acquisition of 40 LNG-fuelled innovative eco-type inland waterway barges against charters with energy major Shell. The barges will be built by Concordia Damen Shipbuilding B.V.
Star Bulk loan
We are currently advising ABN Amro Bank N.V. – in its capacity as agent, security agent and sole lender – on a US$36 million junior facility for the purpose of partly refinancing the purchase price of 42 VDL scrubbers and financing the Atradius Insurance Premiums secured over obtaining second priority/preferred mortgages over 22 fleet vessels of Star Bulk Carriers Corp.
Stolt facility
We advised Nordea Bank Abp, filial i Norge in connection with a US$415 million sustainability linked secured loan facility made available to the Stolt Tankers Group. The agreement provides for a term loan facility and a revolving credit facility, secured against a fleet of 19 vessels across two flag states. The loan included a margin adjustment based on two KPIs and imposed some sustainability covenants on the borrower.
DNB Bank financing
We advised DNB Bank ASA in connection with a US$154 million sustainability linked secured term loan advanced to a joint venture vehicle established by Kristian Gerhard Jebsen Skibsrederi AS and Hayfin Capital Management. The finance documentation, secured against a fleet of ten vessels, contained a number of bespoke green finance provisions including a margin ratchet linked to sustainability key performance indicators as determined by the Poseidon Principles – the self-governing climate alignment agreement among financial institutions active in the ship finance sector.
Star Bulk financing
We advised Star Bulk Carriers Corp. in a refinancing from a syndicate of banks led by DNB Bank ASA. The refinancing included a sustainable margin adjustment based on the Fleet's AER.
Peacock financing
We advised a syndicate of lenders - comprising ABN AMRO Bank, ING Bank, TIAA FSB and Clifford Capital - on a sustainability-linked loan. The deal involved the upsize and conversion of a US$200 million senior secured financing facility to the Peacock Container Group, with stakeholders ultimately closing a US$240 million senior secured sustainability-linked financing facility. The sustainability provisions included a margin adjustment mechanism based on the borrower's ESG score determined by an independent sustainability assessor. More information: here.
Sustainability loan to Ocean Driller retrofit financing
We advised Ocean Driller Limited in relation to the financing of an LNG Carrier made available by Standard Charter Bank, which included a margin adjustment mechanism dependant on key performance indicators and the maintenance of Enviro+ classification notation.
Loan to Diana Shipping group
We advised ABN Amro Bank N.V. in relation to a loan provided to the Diana Shipping group. The loan included a margin adjustment mechanism dependant on the fleet's AER and ECBT score.
HSBC's US$13.6 million facility
We advised HSBC on its first shipping sustainability and transition-linked financing for Stem Shipping Co S.A in respect of a five-year US$13.6 million facility. The loan will enable the company to progress its ESG goals by establishing a key performance indicator that aligns with the sector's wider sustainability and regulatory targets in relation to the reduction of CO2 emissions.
U-Ming Marine Transport financing
We advised the Tapei Branch of Australia and New Zealand Banking Group Limited in respect of a bilateral USD 50 million facility to U-Ming Marine Transport (Singapore) Private Limited. The facility included sustainability-linked provisions such as a margin adjustment based on the fleet's AER score, annual reporting and reliance on an ESG opinion from DNV Business Assurance Singapore Pte. Ltd.
Hoegh Autoliners
Advised Hoegh Autoliners on a series of zero carbon ready vessels.
First scrubber financing backed by a GIEK guarantee
We advised KfW-IPEX Bank on a US$72 million loan agreement to Quantum Pacific Shipping for the purchase and installation of scrubbers. Backed by the Norwegian export credit guarantee agency GIEK, the facility will be used to acquire and install exhaust gas cleaning scrubbers from Clean Marine. It is the first scrubber financing that has been backed by a GIEK guarantee. More information: here.
GATX Corporation
We advised long-standing client GATX Corporation on the new management of its five gas carrier vessels by Anthony Veder, and their entry into the Anthony Veder gas pool. Anthony Veder is involved in all segments of gas shipping, from LNG to LPG, and ethylene to CO2. More information: here.
Advise on the creation of The Sea Cargo Charter
We advised the Global Maritime Forum ("GMF") on the creation of The Sea Cargo Charter, which follows in the footsteps of the Poseidon Principles, another GMF initiative, and is a further development towards the aim of sustainability in the maritime industry. It aspires to set a new benchmark for transparent climate reporting, and improved decision-making in line with the United Nations decarbonisation targets. More information: here.
BNP Paribas
Advised on the structuring and documentation for a green loan. The green loan was made available after Vigeo Eiris, an independent international ESG research provider, confirmed compliance with the four core components of the LMA's Green Loan Principles (GLPs). A key part of the financing was the agreement around the green loan infrastructure and the related representation and undertakings. These included discussion around the LMA’s GLPs, the third party verification opinions, the green loan framework, the green loan reporting obligations and the Poseidon principles (a global framework which ensures responsible ship finance portfolios).
Swire Pacific Offshore
Advised a subsidiary of Swire Pacific Offshore in connection with sustainability linked loans made to a company that owns and operates state-of-the-art turbine installation vessels. The loan included a margin ratchet linked to the achievement of certain agreed ESG criteria and was certified by CICERO.
KfW IPEX-Bank
Advising KfW IPEX-Bank in respect of the US$72 million GIEK backed fleet exhaust gas cleaning system retrofit financing for Quantum Pacific Shipping. The deal was named ‘Green Ship Finance Deal of the Year – East’.
Peace Boat NGO
Advising Peace Boat on the acquisition and financing of a cruise ship from Royal Caribbean. Peace Boat is a Japan-based international NGO which promotes peace, human rights, and sustainability. Established in 1983, it holds Special Consultative Status with the Economic and Social Council (ECOSOC) of the United Nations (UN).
Green lease facility for Hapag-Lloyd
We advised ICBC Financial Leasing in its capacity as owner and lessor in relation to a US$472 million green lease facility of three 23,500 TEU newbuilding containerships for Hapag-Lloyd. The newbuild ships will be powered by LNG dual fuel engines and are part of Hapag-Lloyd's order of six ultra-large containerships worth up to US$1 billion with Daewoo Shipbuilding & Marine Engineering. The transaction fulfils the Green Loan Principles of the Loan Market Association and the performance of the six ships is in line with the Climate Bond Initiative trajectory as certified in the form of a second-party opinion by DNV GL as an independent expert.
