Ship Financing Reforms Announced By Secretary Of Transportation Dole
Secretary of Transportation Elizabeth H. Dole has announced a series of reforms and improved criteria for Federal guarantees of private sector financing to construct, reconstruct, or rehabilitate vessels in U.S. shipyards.
A new rule details amendments to the regulations implementing Title XI of the Merchant Marine Act of 1936. The Title XI assistance program has a statutory ceiling of $9.5 billion on guarantee authority; outstanding guarantees currently total $7.2 billion. The changes in the Title XI program, which is administered by the Department's Maritime Administration, became effective on April 8 this year.
"These new procedures should assist both the applicants and the Department in preparing and evaluating Title XI applications in the most efficient, cost-effective, and equitable manner possible," said Secretary Dole. Maritime Administrator Harold E. Shear said, "These important revisions to the Title XI regulations and procedures will bring the program more in line with commercial practices." The new regulations will, among other things: Require more detailed assessments of the economic viability of the Title XI applicant's project and the vessel supply/demand inventory in the trade in which the vessels will operate; Require an applicant to demonstrate that the Title XI project will generate at least a 10 percent internal rate of return; Strengthen the financial criteria that applicants must meet, including increased levels of equity investment; Tighten requirements that must be met by financially troubled companies that seek financial assistance from the government to service Title XI debt; and Increase the applicants' Title XI investigation (application) fees from the previous one-eighth of one percent to one-half of one percent of guarantee amounts up to and including $10 million. Any guarantee amount exceeding $10 million will carry a fee of one-eighth of one percent.