Kim & Chang advised on a grand-scale ship financing project requiring examination of all financing elements involving purchase of a COA (contract of affreightment) business.  

To improve its corporate liquidity, shipping company X (“Company X”), sold a significant part of its COA business to shipping company Y (“Company Y”)—namely, a business whereby the vessels will generate substantial income from the COA arrangements with Vale S.A. (a leading global producer of iron ore) and its affiliates. 

The project was conducted in three phases: (i) acquiring the COA business for which the purchase price is to be paid by Company Y to Company X upon satisfaction of certain conditions; (ii) terminating the existing Company X loan facility and security structure for the vessels with the proceeds from the purchase price; and (iii) extending new financing to Company Y and establishing new securities for a Korean  financial institution.  

Subject to strict firewall arrangements, Kim & Chang represented Company Y for item (i) and represented the Korean financial institution for items (ii) and (iii).     

We led and implemented all aspects for such reset, taking into account all relevant multi-jurisdictional issues spanning from Switzerland, Brazil, Panama and England to Korea.

While typical ship financings focus primarily on lending terms with the financiers, this should not cause to lose sight of the fact that ship financings on a grand scale involves all other elements necessary for adding value to, and, thereby, becoming integral parts to, ship financings.  Indeed, this ship financing would not have been possible without ensuring that the COA business will be purchased and provided as security in compliance with the applicable legal and regulatory regimes of many jurisdictions.  

Such a grand-scale project requires a broad and in-depth expertise on all relevant areas of law (laws relating to M&A and COAs to name a few), and we played a major role in leading the project to success.  As demonstrated in this project where we have been engaged to represent both the senior lenders and purchaser on a firewall basis, we, in such grand-scale projects, typically are engaged to lead all important areas of the project.