New Product: Risk Profile Analysis Available for Ship Purchase Negotiating

Finally, a statistical tool geared specifically to ship financing variables has been developed. The technique, devised by Shipping Intelligence, Inc. of New York, addresses the difficult-to-quantify risks of concern to capital investors and equity participants involved in vessel purchases.

“Old standby statistics like internal rate of return (IRR) do not entirely satisfy the needs of ship purchase decision-making,” Shipping Intelligence’s Sydney Levine said. He decided an analysis was needed that goes beyond IRR and its variables of purchase price, financing parameters, time charter rates and running costs. His Risk Analysis, which includes a base case and variations thereof, profiled over a spread of equity levels from 10 to 60%, accounts for risk factors considered unique to the purchase and operation of ships – namely, residual value fluctuations and the difference between estimated and actual charter/freight rates.

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