• Economic Soundness
• Financial Requirements
• Technical Acceptance
• Legal and Regulatory Compliance
• Insurance Requirements

Economic Soundness

Economic soundness of the applicant and/or guarantor is a primary consideration for approval of a proposed project and is critical for establishing the applicant’s ability to meet minimum financial requirements and demonstrate the ability to repay the Title XI loan.  An applicant and its guarantor must demonstrate the following requirements:

• Need in the particular segment of the maritime industry for new or additional capacity;
• Market potential for the employment of the vessel or utilization of the shipyard over the loan term;
• Projected revenues and expenses associated with the employment of the vessel or utilization of the shipyard;
• Charters, contracts, agreements, or undertakings which are relevant to the employment of the vessel or utilization of the shipyard;
• Need for technical improvements, such as increased fuel efficiency or improved safety (for inland waterway projects); and
• Any other information believed to be relevant to the project.

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Financial Requirements

To be eligible for a loan, an applicant, its parent company guarantor (if applicable), and any other participants having a significant financial or contractual interest in the proposed project will be required to submit U.S. GAAP-compliant, audited financial information. Each applicant and guarantor of the applicant (or any other participant) must demonstrate creditworthiness and the ability to repay the Title XI debt. Applications are considered based on the credit profile of the applicant and guarantor, project risk, and how the applicant compares to other entities with similar credit characteristics and qualities.

Effective January 16, 2024, the previous static financial tests are no longer required.  As part of its review process, MARAD will use financial requirements, consistent with federal credit and maritime lending best practices for similar entities.  This includes consideration of alternative methods of amortization, other than level principal or level debt payment, when it is demonstrated that such other method is in the best interests of MARAD.

The following examples are typical types of financial requirements that may be considered as part of any project review:

• Minimum equity funded or committed prior to MARAD approval;
• Minimum liquidity level;
• Minimum debt service level; and
• Maximum leverage level.

While the loan can be up to 87.5% of the Actual Cost(s), underwriting tests and standards still must be met.  The fundamental credit quality of each application will generate a unique result for each set of circumstances presented.  (A higher equity amount may be required depending on the specifics of each application being reviewed.)  While Applicants may apply for the maximum loan amount, the Title XI Program encourages applicants to discuss these dynamics, and their expectations, with the Title XI Program team.

Appropriate other affirmative and negative covenants (including financial tests) will be determined during the application review process and must be agreed to by each applicant and/or guarantor prior to loan approval.

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Technical Acceptance

To be eligible for a loan, the vessel financed under the project must meet the following criteria:

• Constructed in the United States and meet the applicable requirements of the U.S. Coast Guard;
• Acceptable actual costs for construction, reconstruction, or reconditioning;
• Constructed, maintained, and operated to meet the requirements of either the American Bureau of Shipping (ABS) or another approved classification society;
• Comply with any applicable U.S. laws relating to vessel operation; and
• For reconstruction or reconditioning – demonstrate that needed work on the vessel would not be the result of inadequate maintenance and repair.

To be eligible for a Title XI loan, the operator of the vessel financed under the project must meet the following criteria:

• Provide detailed information about the applicant and bareboat charter to demonstrate that it has the necessary experience, ability, and other qualifications to operate and maintain the vessel;
• Identify the ownership of the applicant, including tax identification number, principal business address, articles of incorporation, and officers;
• Principal business of the applicant for the previous five years, including information on controlled business entities and nature of all relevant businesses;
• Information on all management personnel; and
• Detailed statement of applicant’s ability to successfully operate the financed vessel.

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Legal and Regulatory Compliance

An applicant for a project involving a vessel to be operated in the U.S. coastwise trade must demonstrate U.S. citizenship for the owner and any bareboat charterer.  Additionally, if the applicant is a partnership or limited liability company, governing agreements for the entities must be in a form and substance satisfactory to the MARAD.

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Insurance Requirements

• Vessels or U.S. shipyard financed by Title XI must maintain adequate insurance during the entire term of the financing; and
• Insurance must be provided by an approved domestic or foreign underwriter.

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