Ship financing forms published to ensure uninterrupted use of ships
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can ensure the charterers’ uninterrupted use of a ship if the owner defaults under the financing facility.
The QELs will be provided by the lender to the charterer to ensure that the charterer, who does not have a contractual relationship with the lender but only with the owner, can continue to “quietly enjoy” the ship in case of the owner’s default.
In return, the charterer gives a certain number of undertakings, including not to cancel the charter party and to continue to pay amounts due under the charter party. The QELs also offer lenders an opportunity to secure their rights, such as appointing a replacement owner in case of a default.?
The QELs have been developed in a collaborative process involving representatives of owners (Wah Kwong and Oldendorff Carriers), charterers (BHP and Noble Resources International), lenders (Danish Ship Finance), leasing institutions (CMB Financial Leasing Co. Ltd.) and legal experts (Linklaters LLP and Holland & Knight LLP).
Two versions of the QEL have been developed: a standard quiet enjoyment letter signed by the lender and agreed by the owner and charterer, and a “short form” version which is signed only by the lender.
The QELs have been drafted for use with bareboat and time charter parties, as well as ship leasing structures, and complement BIMCO’s existing portfolio of term sheets for ship financing and ship sale and leaseback transactions which includes the SHIPTERM, SHIPTERM S and SHIPLEASE term sheets, said a release.
Source: Exim News Service: London, Feb. 21