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The structure of a shipping finance investment product typically looks as follows: 

A structured financial shipping product is essentially a straightforward financial lease. A fundamental requirement for each deal is to have a cornerstone shipping company included amongst the investor consortium operating in the same shipping segment. This is to provide a back-up management solution should the charterer default. Should a default occur, the cornerstone investor will step in to man and manage the vessel with the aim of maximising investor returns from operating in the open market.

Shipping finance products offer relatively high yields, regular quarterly distributions and the potential for capital appreciation. The product is essentially similar to a real estate investment whereby the shipping line charter a vessel for a considerable length of time in return for rent (charter fees). The rent and yield is typically attractive over property investments as the life of a vessel is limited to 25 years dependent on maintenance programs, market forces at large and the suitability of the vessel at the tail end of its economically viable life.

The risks in maritime shipping finance investments are not dissimilar to that experienced within real estate. The main risk revolves around to what degree the charterer (lessee) will have the financial capacity to pay its charter fee (rent). Rents are typically structured high in the initial years to reduce the risks for the investor and to pay back the majority of the principal early in the investment life cycle. The secondary risks revolve around the level of gearing, the ability to re-finance and the market value of vessels in the open market should the charterer falter. PortNordica and its partners structure each investment in a separate SPV (Special Purpose Vehicle) company to quarantine the failure of a charterer to one investment syndicate.

The charterer typically has an option to acquire the vessels at the tail end of the charter at a conservative figure reducing the risk for the investor. At times there is a profit share clause at the tail end of a charter party to give investors and charterer an equal or otherwise agreed share in the uplift in the value of the vessel.

As with most sectors the Maritime sector was hit hard by the GFC, and PortNordica agree with its partners in Norway that opportunities not seen in a long time will eventuate in this sector.