Asset Finance in Brief

This blog post compares the uses of liquefied natural gas (LNG) as a marine fuel with other options for complying with the more stringent sulfur emission requirements of the International Maritime Organization (IMO) beginning in 2020 and then discusses the development of LNG as a marine fuel. The IMO 2020 sulfur limit The IMO is the United Nations agency tasked with setting global standards for safety, security and environmental performance in global shipping. In 1973…
No equipment lessor wants to find itself a creditor of a lessee in a reorganization case under chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code).  However, when such a situation arises, a lessor is not without recourse – even where the facts give rise to situations not specifically addressed by the Bankruptcy Code.  This post considers two scenarios highlighting the exposure creditor-lessors may face in the bankruptcy context and provides guidance for minimizing…
In a decision with sweeping consequences for equipment lessors, the bankruptcy court (SDNY) in Republic Airways held that a liquidated damages provision in a true lease is an unenforceable penalty if it provides for the unconditional transfer of residual value risk or market risk only upon default, without a cognizable connection to any anticipated harm caused by the default itself. Importantly for lessors and lenders alike, the bankruptcy court held that the unconditional guaranties of…
Whenever interrelated contracts apply, different laws, issues and defences may arise owing to the discrepancies between the applicable legal systems. In HSBC Bank PLC v. Pearl Corporation SA and Ors, the High Court had to consider Greek law defences to a personal guarantee, governed by Greek law, in the context of a loan agreement governed by English law. It was held that on the particular facts the defences under Greek law failed. Nevertheless, such defences…
Newly-effective California law requires a non-bank provider of commercial financing to present its financing recipient with certain consumer lending-style cost disclosures at the time when making an offer of commercial financing, and to obtain the recipient’s signature on the required disclosure before consummating the financing. While effective now, parties need not comply with the new law for an undetermined period of time. California Senate Bill 1235 was approved and filed on September 30, 2018, creating…
On August 26, 2018, the UK government issued its response to its consultation on insolvency and corporate governance. The consultation sought views on how the risk of company failure could be reduced by improving the corporate governance and insolvency framework. The response summarized the views and comments received during the consultation, and sets out a number of proposals that will have significant implications for English companies and their creditors and investors. At the heart of…
For many decades, companies in the business of leasing “over-the-road” vehicles such as trucks, tractors, and trailers, have used terminal rental adjustment clause (TRAC) leases to maximize the value they can provide to their customers. Traditionally speaking, TRAC leases combine the tax advantages of leasing with an option to purchase the equipment at the end of the lease term for a residual amount determined at the inception of the lease. Since 1981, it has been…
As part of a concerted move by the shipping industry community to reduce the environmental impact of shipping, the International Maritime Organization (IMO) has introduced regulations to reduce sulphur oxides emissions. These regulations require ships operating outside designated emission control areas to burn marine fuel with a limit of up to 0.5 per cent sulphur content by January 1, 2020, or install scrubber units into exhaust stacks to continue to burn High Sulphur Fuel Oil…
Liquidated damages in true leases: applicable law Uniform Commercial Code Section 2-A-504 is the applicable law regarding liquidated damages in a lease agreement. Section 2-A-504(1) provides that: “Damages payable by either party for default . . . including . . . loss or damage to lessor’s residual interest, may be liquidated in the lease agreement but only at an amount or by a formula that is reasonable in light of the then anticipated harm caused…
The shipping industry is a major contributor to harmful air pollution, generating an estimated 2.5 percent of the world’s greenhouse gas emissions. In a global market, the maritime transport sector is depended on as a reliable and cost-effective means of transporting goods. The huge volume of shipping activity and direct impact of the industry on carbon dioxide emissions have led the shipping industry to become the focus of several new green shipping initiatives, particularly in…