The global maritime industry faces a series of challenges, from new environmental regulations to geopolitical uncertainties. Increasingly, maritime businesses value corporate service providers that can help reduce complexity, better meet new regulatory compliance, and support the demand for alternative financing solutions.
The global maritime industry is a highly diversified ecosystem, encompassing sectors such as offshore drilling, offshore wind, offshore fish farming, carbon capture and storage, commodities and passenger freight, shipbuilding, second-hand ship trading, and decommissioning and recycling ships and marine installations.
The characteristic cyclicality and volatility of shipping and offshore operations, with various sector specific features, make maritime finance both broad and complex.
Ship finance has traditionally been centered around bank lending, often structured as senior secured syndicates, with one or more banks acting as lead arranger, facility agent, and security agent.
However, the global financial crisis of 2007-2009 led to some bank lenders experiencing significant losses, and adopting stricter capital requirements. This has resulted in a decline in the engagement of commercial banks with maritime finance, and an increase in direct lending and private capital.
What are the key challenges faced by the maritime industry?
Access to finance is just one of the hurdles faced by the maritime sector. Global macroeconomic trends and political instabilities, as well as the ever-increasing complexities of international and local sanctions regimes, continue to pose challenges.
For instance, offshore wind projects, subsea cable installations, and similar infrastructure-related investments are now facing growing war and terrorism-related risks, impacting various stages of the build process, from investment appetite to insurance requirements.
What is the impact of the regulatory environment?
The regulatory landscape also continues to evolve, with a notable increase over the last decade in rules and regulations applicable to shipping and offshore companies.
One of the most significant changes is the wave of environmental regulations aimed at reducing the sector’s carbon footprint.
For example, the International Maritime Organization (IMO) 2020, the EU Emissions Trading System (ETS) and the EU Fuel Maritime Regulation impose significant monitoring and reporting obligations coupled with potentially severe financial and operational penalties for non-compliance.
In 2025, shipping companies must cover 40% of their 2024 greenhouse gas emissions with EU allowances (EUAs), increasing to 70% in 2026, and 100% from 2027 onwards.[1] This applies to all large ships (of 5,000 gross tonnage and above) entering EU ports, regardless of the flag they fly. From 2027, offshore vessels above 5,000 gross tonnage will also be subject to EU ETS.
What are the implications of these challenges for maritime finance reporting?
In contrast to other sectors commonly featuring secured finance, such as real estate, marine collateral moves between jurisdictions, in and out of international waters, and may encounter perils including harsh weather conditions, acts of piracy, or terrorism.
Shipping and offshore industries are also capital intensive and asset heavy. Whether financing is structured as non-recourse project finance, linked to a certain charter or drilling contract or project based operations, or as corporate balance sheet lending, revenue generating assets, ships or rigs are typically held in special purpose vehicles (SPVs).
The purpose of an SPV structure is typically to reduce or ringfence financial risks in case of default or bankruptcy; as the risk is relocated from the parent company to the subsidiary. The jurisdiction in which SPVs are incorporated is often determined by factors such as the vessel’s flag and trading routes, ownership constellations, and tax and regulatory considerations.
Importantly, when asset generating revenues are held in an SPV, such an entity must have access to the proper resources for management, reporting, and compliance.
What does the future hold for maritime sector finance?
While traditional banks will continue to focus on a core base of larger clients, smaller or mid-size shipping companies as well as newcomers will likely have to rely on alternative financing sources. Players within volatile sectors or those with an aging shipping fleet are also facing tougher lending conditions.
The good news is that private equity firms and alternative funds, leasing structures and sale-lease back models are helping to fill the gap left by banks. And shipping companies that can accommodate environmental requirements quickly and benefit from the latest digitalization capabilities will be well positioned for attractive financing, including green finance and transitional financing schemes.
The combination of capital intensity and fluctuating risks will continue to make maritime finance an area in which all parties need to balance predictability with flexibility in financing structures.
Both financiers and borrowers need to ensure that relevant information is communicated quickly and accurately, to support timely and appropriate decisions.
What is the role of a corporate services provider in maritime finance?
An experienced, independent third party is typically appointed as agent or trustee for maritime financing, whether it is a loan, bonds, or notes. The agency or trustee function relieves the borrower of administrative burdens, giving it one point of contact with its creditors.
Engaging an independent third party to hold loan collateral ensures non-conflicted and arms-length equal treatment of secured parties and significantly eases the registration and maintenance of valid security rights.
How CSC can help reduce complexity in maritime financing
With more than 125 years of experience, CSC can add value to a variety of financing structures and international transactions within the shipping industry. We understand the need for efficiency and focus on swift execution. From fund administration to loan agency, trustee and escrow services, business administration and compliance, tax solutions and cyber risk services, we assist our clients with tailor-made support for transactions in the maritime sector, wherever they operate.
We assist companies with setting up and keeping SPVs in good legal standing across the globe, including bookkeeping, tax filings, compliance reporting services, corporate secretarial services, and directorship services.
We also offer comprehensive and bespoke solutions for environmental, social, and governance (ESG) data gathering and analytics to help our private equity clients and fund managers take control of their portfolio ESG data.
To find out how we can help remove the complexity from maritime financing and support your business, contact us.
[1] Reducing emissions from the shipping sector – European Commission
