OAL Advocates Ship Management as Model for Maritime Business Recovery

Sunday Ehigiator

Leading law firm in Nigeria, Olisa Agbakoba Legal, has advocated for the engagement of Ship Managing Companies, such as, NBC Maritime Ltd, as a business rescue model, in settling funding disputes between Ship-owners, and their funding banks, rather than through court injunctions.

Speaking at the OAL Breakfast Meeting, held yesterday with the theme, “Ship Management, a Commercial Strategy for Business Rescue,” the Managing Partner, OAL, Yvonne Ezekiel, noted that, “when ship owners struggle to repay loans to banks, a commercial decision must be made.

“Instead of going to court and risking the ship being grounded, bringing in a ship manager to oversee the vessel, generate revenue, and ensure payments to the ship owner, bank, and manager themselves, creates a win-win situation for all parties involved.

“There are several challenges surrounding the maritime business, especially from a ship-owner perspective. Access to finance is a major challenge, with high interest rates often reaching double digits.

“Even when ship owners secure loans, they might not use the funds for their intended purpose, leading to trouble down the line. Additionally, the industry faces multiple regulators and charges, adding to the burden.

“Some ship owners also tend to overlook maintenance, which can cause operational issues and impact their ability to repay loans. Without proper maintenance, ships can run into trouble, become unworkable, and ultimately struggle with loan repayment to lenders. These are some of the key challenges faced by ship owners.”

Offering practical industry insight, the Managing Director, NBC Maritime Ltd, and Director, ABC Maritime, Nicholas Bernard, explained how professional ship management can drastically cut operating costs and improve asset efficiency.

“Ship management is everything from crew and technical maintenance to regulatory compliance and class requirements,” the captain said.

With over 33 vessels under its portfolio, Bernard noted that NBC Maritime offers economies of scale that smaller fleet owners can leverage to reduce OPEX and maximise value.

“Even with my management fee included, our clients often find their operating costs lower than when they handled it alone,” he said.

Representing the financial sector, Divisional Head of Project Finance and Advisory at Fidelity Bank, Wale Mesioye, underscored the complexities of vessel financing. “It is specialised and complex,” he said, pointing to the need for long-term, renewable contracts, competent operators, and proven financial management to secure bank loans.

According to him, “From the bank’s perspective, several factors are considered when financing vessel acquisitions. One key consideration is the ship owner’s experience, typically requiring a track record of three to five years in the business.

“The bank also evaluates the reputation of the backers behind the venture to ensure they are reliable. Additionally, the bank considers the potential for downtime and maintenance costs, expecting ship owners to have a plan in place to manage these expenses.