Operating Expense (OPEX)

Daily operating costs include the cost of Crew, Spare Parts, Insurance.  The expenses of Drydocking and Special Survey are also operating costs. Always remember to check if daily operating expense quoted is including provision for DD/SS.

For financial analysis and modelling of ship investments, the cost of off-hire should also take into account.

For ships on time-charter, the charterer pays … Read the rest

Monte Carlo simulation

Monte Carlo simulation is a computerized mathematical technique used to analyze risk. Monte Carlo simulation performs risk analysis by building computer models of possible results by substituting a range of values—a probability distribution—for any factor that has uncertainty. It then calculates results over and over, each time using a different set of random values from the specified probability function for … Read the rest

Trade Out Rate

Trade Out Rate to Scrap Value is the Bareboat Rate (Debt Service) per Day required to pay the remaining debt balance down to estimated scrap value over the remaining economic life of the ship. Trade Out Rate to Zero is the Bareboat Rate (Debt Service) per Day required to pay off all the remaining debt balance over the remaining economic … Read the rest

Debt Service Break-Even

Debt Service Break-Even is calculated by taking the debt service per day and adding the OPEX per day, including provisions for periodical dry docking (DD)/special survey (SS). If the debt service per day is USD6,780, the OPEX (excluding drydocking) is USD5,800 per day, and the estimated cost of the next drydocking is USD250,000 with 887 earnings days (30 months adjusted … Read the rest

Debt Service Per Day

Debt Service Per Day is calculated by taking the total debt service during a period and dividing it by the number of days in the period but adjusted for off-hire. For example, if the debt service (scheduled loan repayments plus interest payments) for a period is USD1.2 million over 182 days and the expected off-hire in the same period is … Read the rest

Interest Cover Ratio

Interest Cover Ratio is calculated by dividing the total cash flow available to service debt during a specific period and dividing it by the interest payment for the same period. Where interest is not being paid, the lending bank will have to account for the loan as being non-performing and make necessary loss provisions in its accounts. The bank may, … Read the rest

Debt Service Ratio

This ratio is calculated by taking the total cash flow available to service debt during a specified period and dividing it by the total amount of debt repayment plus interest payment for the same period. The period chosen is normally that from one debt repayment date to the next (typically, six months).

Required Minimum Value

This figure shows the minimum market value the ship can have before a loan is in breach of its minimum value covenant. It is calculated by taking the outstanding loan balance and multiplying it by the LTV ratio. For example, if the loan balance is USD10 million and the LTV covenant is 130%, the required minimum value will be USD13 … Read the rest

LIBOR

London Interbank Offered Rate (LIBOR)