Why Charter Operators Refinance Their Fleet
Charter fleet refinancing serves several strategic purposes. The most common is equity release - using the value built up in existing vessels over the years of a finance term to fund the acquisition of new or additional charter vessels without requiring large cash deposits. This allows established charter businesses to scale without waiting to accumulate cash reserves.
A second common driver is rate improvement. A charter business that has traded for several years and built a strong P&L, DSCR record, and reputation may be able to refinance existing facilities at significantly better rates than when they originally borrowed - reducing ongoing finance costs and improving cashflow.
Third, many charter operators use refinancing to consolidate multiple separate vessel loans into a single portfolio facility, reducing administration burden and often improving overall terms.
LTV on Aged Charter Fleets
LTV calculation for refinancing is based on current independent survey valuations - not original purchase price or outstanding loan balance. This creates important considerations for aged charter fleets: vessels depreciate over time, and a 10-year-old sailing yacht may be worth significantly less than when it was originally purchased. Lenders apply LTV caps (typically 70–80% of current value) to refinancing facilities, meaning operators can only release equity up to the maximum LTV on the current fleet value.
For fleets with significant depreciation, the available refinancing amount may be lower than operators expect. This is why it is important to commission up-to-date marine surveys before approaching lenders for refinancing - so you understand the equity position before entering the process.
Top-Up Structures for Fleet Expansion
A top-up structure allows a charter operator to refinance their existing fleet and simultaneously acquire a new vessel within a single transaction. The refinancing of the existing fleet releases equity, and that equity (plus any additional deposit) funds the new acquisition - all within one lender facility rather than requiring separate finance for the new vessel.
Close Brothers and Hampshire Trust are the most experienced lenders in top-up fleet structures. They can assess the aggregate security position across the existing fleet and the new vessel simultaneously, providing a single facility covering the whole portfolio.