Classification society

A non-governmental organization that establishes and maintains technical standards for the construction and operation of ships and offshore structures.

Deadweight tonnage (DWT)

A measure of how much mass a ship can carry. It does not include the weight of the ship itself. DWT is the sum of the weights of cargo, fuel, fresh water, ballast water, provisions, passengers, and crew.

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).

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

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

Ships as investments

Ships as investments have many features similar to marketable financial instruments like shares, bonds, or traded options:

  1. The market price of a ship can be interpreted as the present value of the expected cash flow from the ship during its remaining economic life, discounted at a rate of return that reflects the market’s perception (pricing) of downside risks and upside
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