Ship Building Sale and Finance

Page 170


Mortgagees' interest insurance

Mortgagees' interest insurance

Peter MacDonald Eggers QC

11.1 Introduction

When ships are built or purchased, the purchaser – the shipowner – very often uses funds borrowed from a lender who will secure the loan over the ship which is the subject of the shipbuilding contract or the contract of purchase. The mortgage advance in respect of a ship will be based on mortgagee documentation and agreements designed to protect the lender’s interest against the various risks to that interest. As regards ship’s mortgages, the risks arise by reason of the mobility of the vessel, the exposure of the vessel to the political risks associated with the various jurisdictions and legal systems which the vessel will encounter, the effect of maritime law, the full range of maritime perils to which the vessel will be exposed,2 and the financial risks associated with the credit of the shipowner, the vessel’s earning potential and charter engagements, the vessel’s value and condition and the amount of the loan.

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