Pre-purchase Inspection of Ships

Ships at seaThe Pacoship financial model for the analysis of shipping investments has the cost of pre-purchase inspection as one of the inputs for calculating the cash flow of a shipping investment project.Before purchasing a secondhand ship, the buyer will always (with some scarce exceptions) inspect the vessel before purchase. 

Most often, the buyer will ask to inspect the ship before making an offer to buy. Sometimes the buyer makes an offer to buy the vessel, subject inspection.  In my view, it is, however, best practice to inspect the ship before making an offer. Making an offer to purchase with subject inspection may come across as a less serious intention to buy and may be viewed as an attempt to test out seller’s interest and price level.

Banks and other financiers will, of course, want to see the inspection report before committing to financing the ship purchase.  Banks will often have a list of approved surveyors that they wish the shipowner to use when inspecting a ship before purchase.   The bank or other financiers will rely on the written inspection report to determine the quality and state of the ship.

I came across this white paper on pre-purchase inspections of secondhand ships prepared by Wilhelmsen Ship Management:

Facing the Storm with Confidence

The health and safety of its passengers and crew is the priority for all shipping companies. It always should be, and it always is. Now we also need to make sure that we operate ships in a way that stops the spread of the Coronavirus as far as possible. The world needs supplies of food and other supplies, and it is entirely possible to operate ships in a way that does not contribute to the spread of the virus.  Procedures for safe port calls, handling of cargoes and rotation of crews have been or are in the process of being implemented. Crews, bunkers and other supplies to the ships must be paid, and I hope that bankers and other ship financiers do not forget that these are maritime liens that do have priority in front of payment of interest and instalments. Most countries are now providing or preparing large financial support packages to banks and other financial institutions.  Some of this support must be allocated to provide necessary financial flexibility to the shipping industry. Shipping banks and other ship finance institutions should, in the first instance, prepare plans for rescheduling of loan repayments, and possible deferral of interest payments. Rescheduling of payments may present particular issues for ships financed with long term leases. The shipping industry is very capable of dealing with changing market conditions and adversity. I am confident that all industry professionals will deal with the situation now at hand with calm, integrity, honesty and skill.



International Handbook of Shipping Finance

The International Handbook of Shipping Finance - Book Cover ImageThe International Handbook of Shipping Finance is a one-stop resource, offering comprehensive reference to theory and practice in the area of shipping finance. In the multibillion dollar international shipping industry, it is important to understand the various issues involved in the finance of the sector. This involves the identification and evaluation of the alternative sources of capital available for financing the ships, including the appraisal and budgeting of shipping investment projects; legal and insurance aspects of ship finance; the financial analysis and modelling of investment projects; mergers and acquisitions; and the commercial and market risk management issues involved.

Edited by two leading academics in this area, and with contributions from 25 prominent market practitioners and academics over 16 chapters, this Handbook covers shipping finance and banking, maritime financial management and investments. As such, it includes: shipping markets; asset backed finance; shipbuilding finance; debt finance; public and private equity and debt markets; structured finance; legal aspects and key clauses of ship mortgages; marine insurance; mechanisms for handling defaulted loans; investment appraisal and capital budgeting; financial analysis and investment modelling; business risk management and freight derivatives; and mergers and acquisitions. Thus, the Handbook offers a rigorous understanding of the different aspects of modern shipping finance and maritime financial management and investments, the various characteristics of the available products, the capital needs and requirements, and a clear view on the different financial management strategies through a series of practical examples and applications. Technical where appropriate, but grounded in market reality, this is a “must-have” reference for anyone involved in shipping finance, from bank practitioners and commodity trading houses, to shipbrokers, lawyers and insurance houses as well as to university students studying shipping finance.



Manolis Kavussanos, Professor, Director, MSc in International Shipping, Finance and Management, Athens University of Economics and Business, Greece

Ilias Visvikis, Professor, Director Executive Education and Professional Development, World Maritime University, Sweden