🚢 Equity Bridge Loans in Shipbuilding: Financing the Gap, Fueling the Future

My name is Davide Ramponi, I’m 21 years old and currently training as a shipping agent in Hamburg. On my blog, I take you with me on my journey into the exciting world of shipping. I share my knowledge, my experiences, and my progress on the way to becoming an expert in the field of Sale and Purchase – the trade with ships.

Ordering a newbuild vessel is a complex decision. It’s a long-term bet on future charter rates, fuel technologies, regulatory compliance, and capital markets. But it’s also a financial challenge from day one. That’s because before the vessel is delivered — and often long before long-term financing is in place — the shipowner must begin making payments to the yard.

Enter equity bridge financing: a short-term solution that plays a big role in modern shipbuilding deals. These bridge loans are used to cover equity contributions until permanent financing is secured — unlocking smoother negotiations with yards, preserving liquidity, and enabling timely delivery slots.

🔍 In this post, I’ll walk you through:

📌 What equity bridge loans are and why they matter in shipping

🏦 Typical structure, tenor, and pricing of these short-term instruments

📈 Benefits for shipowners in managing capital and negotiation leverage

⚠️ Risks for lenders — and how they’re mitigated

🧭 Real-world examples and current market availability

Let’s explore how this bridge — although temporary — can shape entire fleet strategies.

🧱 What Is Equity Bridge Financing?

Equity bridge financing (EBF) refers to a short-term loan provided to cover the equity portion of a vessel’s cost until long-term financing is finalized or triggered.

In shipbuilding, this typically covers pre-delivery yard installments — often 20–40% of the contract value — which are due well before the vessel is on water or earning revenue.

⚙️ How It Works:

1. A shipowner places a newbuild order (e.g., $60M product tanker)

2. Yard requires staged payments: 10% on signing, 10% at steel cutting, 10% at launching

3. Owner doesn’t want to (or cannot) tie up equity upfront

4. An equity bridge lender steps in, funding these payments

5. At delivery — when senior debt and/or leasing kicks in — the bridge is repaid

💡 Think of it as a financial “advance” on the equity you’ll soon contribute — but paid upfront to secure progress with the shipyard.

📐 Structure, Tenor & Pricing: What Does a Typical Bridge Loan Look Like?

While structures vary depending on the lender, counterparty, and project profile, equity bridge loans in ship finance tend to follow some common parameters.

🔩 Typical Terms:

Feature	Description
Loan Size	10–40% of newbuild contract value
Tenor	6 to 24 months (rarely longer)
Repayment	Bullet at delivery or refinancing event
Collateral	Assignment of refund guarantees or project shares
Pricing	8–15% IRR equivalent (fixed or floating)
Fees	Arrangement fees (1–2%), commitment fees (if undrawn)

🧾 Example:

A $15M bridge loan used to cover 25% equity on a $60M LNG carrier, repaid via sale-and-leaseback upon delivery — interest rate at 10% + 1.5% fee.

💼 Why Use Equity Bridge Financing?

While it adds short-term cost, an equity bridge offers strategic and operational advantages — especially in competitive or fast-moving shipbuilding cycles.

🟢 Key Benefits for Shipowners:

1. Preserve Liquidity

   • Avoid tying up large cash reserves before vessel delivery

   • Free capital for operations, other projects, or investment returns

2. Secure Yard Slots Quickly

   • Pay signing deposits swiftly, even if long-term financing isn’t in place

   • Especially helpful in tight yard markets (e.g., dual-fuel or specialized vessels)

3. Leverage Capital Stack Efficiently

   • Maximize return on equity (ROE) by reducing idle capital pre-delivery

   • Use bridge strategically to “hold” slots before fundraise or bank approval

4. Flexibility in Financing Timeline

   • Align debt raising, sale-and-leaseback, or JV equity closer to delivery

   • Hedge against rate changes or sponsor alignment issues

📌 Case Insight: 

A Greek owner used a $12M bridge loan to secure 2 methanol-ready MR tanker slots. By the time delivery approached, market rates had risen, and the ships were refinanced at a 10% premium — covering interest costs and then some.

⚠️ Risks and Lender Protections: Not All Bridges Are Built the Same

From the lender’s perspective, equity bridge loans carry unique risks. There’s no vessel yet, no cash flow, and repayment depends on successful refinancing or delivery.

🔴 Common Risks:

• Non-delivery: Yard or owner may default, delaying repayment

• Refinancing Failure: Senior lenders pull out, sale falls through

• Regulatory Delays: Flag, class, or environmental issues stall project

• Sponsor Risk: Equity backer fails to inject funds post-bridge

🛡 How Lenders Protect Themselves:

1. Security Package

   • Assignment of refund guarantees

   • Share pledge in project SPV

   • Escrowed proceeds from delivery/refinance

2. Strict Covenants

   • Timelines for senior loan closing or asset commitment

   • Restrictions on project changes or counterparty substitution

3. Personal or Corporate Guarantees

   • In cases with private/family-owned sponsors, personal recourse is common

4. Interest “Step-Up” Clauses

   • If repayment is delayed, interest may rise significantly

📌 Lender Tip: 

EBF works best with trusted counterparties, reputable yards, and well-progressed commercial plans (e.g., time charter or leasing lined up).

🌍 Market Availability and Real-World Usage

Equity bridge financing is not new — but it’s become increasingly popular in today’s shipping market due to rising yard prices, ESG-linked vessel demand, and tight capital cycles.

🏦 Who Provides It?

• Maritime private credit funds (e.g., Hayfin, Breakwater, EnTrust Global)

• Specialist ship finance arms within leasing houses (e.g., ICBC Leasing, CMBFL)

• Boutique advisors offering structured debt placement

• In rare cases: strategic investors or family offices

🌟 Notable Use Cases:

• Containership Newbuilds (2021–2023)→ Several owners used EBF to secure slots in South Korean yards amid a container boom

• Alternative Fuel Projects→ Owners ordering ammonia- or methanol-ready ships often need time to finalize tech partners — using bridges to start construction anyway

• Sale-and-Leaseback Prep→ Bridge used to cover yard payments before sale-and-leaseback deal is locked in near delivery

📊 Data Point: 

In 2023, equity bridge loans accounted for 12–15% of all pre-delivery ship finance volume in Asia-Pacific newbuilds, according to Marine Capital Analytics.

📦 Conclusion: Short-Term Debt with Long-Term Impact

Equity bridge financing may be short in duration, but its impact can be long-lasting. Whether it helps secure a prime yard slot, manage liquidity, or prepare for institutional capital entry, EBF has become a powerful — and often underappreciated — tool in the ship finance toolkit.

Key Takeaways 🎯

✅ Equity bridge loans cover upfront equity contributions in shipbuilding projects

💡 They allow owners to lock in vessels before long-term capital is finalized

📈 IRRs are high, but strategic value can outweigh cost

⚠️ Lenders mitigate risk through refund guarantees, covenants, and careful structuring

🌍 Usage is rising, especially in ESG-linked or high-tech vessel orders

For owners with ambition but limited capital timing, equity bridge financing offers a smart way to cross from opportunity to execution — one step at a time.

👇 What do you thing?

What factors do you look for in a lender, and how do you manage the risks?

💬 Share your thoughts in the comments — I look forward to the exchange!

---

---