The ship finance industry continues to evolve in a manner previewed in years past by regulatory action and evolving lender profiles. This Holland & Knight article explores recent trends in traditional bank lending and the rise of direct and private credit lenders. Key topics include the impact of Basel IV in Europe, proliferation of revolving credit facilities, burgeoning role of direct lenders, impact of the Nordic bond market and effects of the suspended U.S. Trade Representative (USTR) port fees on lease finance strategies.

The Impact of Basel IV: A Challenge for Ship Finance

One of the seemingly evergreen narratives in ship finance is the still-unclear impact of Basel IV on lending by European banks. Basel IV, the latest iteration of global banking standards, was implemented in the European Union at the beginning of 2025. It aims to strengthen regulation, supervision and risk management. However, the full extent of the impact of Basel IV on ship finance remains unclear and has led to a cautious stance among many European banks.

European banks are historically, and continue to be, major financiers for shipowners. Basel IV has a significant impact particularly on European banks and has led to a more selective approach to new ship finance deals. Going forward, European banks are likely to prioritize top-tier shipowners with better credit ratings. For smaller owners or those with less-predictable earnings, access to traditional bank finance remains challenging. This uncertain environment is prompting both lenders and borrowers to explore alternative structures and partners.

Revolving Credit Facilities: A Preferred Tool for Larger Shipowners

Another conspicuous trend is the increasing use of revolving credit facilities (RCFs) by shipowners. Traditionally associated with corporate borrowers, RCFs have become commonplace among shipping companies, particularly those with strong earnings and credit profiles. The flexibility of an RCF allows shipowners to draw, repay and redraw funds as business needs evolve, positioning them to capitalize on market opportunities or weather unexpected downturns.

In the past few years, several high-profile shipowners have secured substantial RCFs, often with tenors of five to seven years. These facilities are typically provided by syndicates of international banks, demonstrating that where risk is deemed acceptable, traditional lenders remain competitive. The preference for RCFs reflects both the stronger financial position of many shipowners and a broader industry focus on the future – shipowners recognize the cyclical nature of shipping and want to ensure liquidity for fleet renewal, expansion or opportunistic acquisitions. RCFs have also emerged as a key tool for established public and private companies simplifying their capital structure through a global Norwegian or U.S. bond financing. In these instances, the RCF typically is positioned as senior or pari passu with such bonds rather than the sole source of debt financing.

The Rise of Direct Lenders: Expanding Beyond Niche Lending

It is no secret that when traditional bank lending becomes more selective, direct lenders – private credit funds, other “alternative credit providers” and institutional investors – have stepped in to fill the void. Initially, these alternative financiers focused on high-margin, higher-risk credits: smaller shipowners, distressed deals or less-conventional asset types. Over the past year, however, there has been a marked expansion in the role of direct lenders.

Direct lenders have established a key role in competing head to head with traditional ship finance banks, offering competitive terms and structuring bespoke solutions to more-established shipowners willing to pay a higher coupon for execution certainty and flexibility. The growth in direct lending is driven by a slightly higher-rate environment, narrowing the gap between bank interest rates and fees and a nonbank lender’s interest rate of return, ample liquidity in the private markets, investors’ search for yield and the flexibility these nonbank lenders can offer. Unlike traditional banks, direct lenders are not constrained by the banking regulations affecting traditional ship finance banks, allowing direct lenders to move quickly and tailor structures to complex needs. Direct lenders market their ability to close quickly and provide certainty of execution. This evolution has increased competition in ship finance and provided shipowners new options beyond the traditional bank-led paradigm.

The Impact of USTR Port Fees on Lease Financing

The most notable headline in ship finance in the last year has been the introduction, and now suspension, of port fees by the USTR targeting Chinese maritime interests. The introduction of these fees in early 2025 sparked a surge of interest in structuring voyage planning, ownership, management and financing arrangements to minimize the impact. While certain shipowners calling at U.S. ports in October 2025 faced significant costs and expended significant time and effort prior to October 2025 to understand and restructure their fleets to avoid such costs, the future of these port fees remains to be determined.

Of particular note in 2025 was the increased concern regarding refinancing Chinese sale-leaseback financing structures for vessels that call in the U.S. Over the past decade, sale-leaseback transactions with Chinese lessors with higher advance rates and lower capital costs became a popular way for shipowners to finance their vessels. The USTR port fees appeared to be specifically unfavorable to Chinese sale-leaseback financing structures, given the registered owner in a Chinese sale-leaseback is typically ultimately owned by a Chinese entity, which would trigger a payment obligation for the vessel upon arrival at a U.S. port.

This potential adverse impact on companies with Chinese sale-leaseback financing structures has caused some shipowners to consider the traditional debt facilities provided by banks or direct lenders and avoid Chinese sale-leasebacks in order to avoid additional expenses when calling on U.S. ports.

Bond Terms Creeping In

One of the most active sources of capital for shipping companies over the past year has been the Nordic bond market, with several high-profile shipowners raising capital for a variety of asset types – most notably, cruise vessels and tankers. The continued ability for shipowners to access the Nordic bond market, with its relatively light and flexible issuer covenants, has influenced the broader borrowing landscape. Shipowners, observing the advantages offered by these flexible bond terms, are increasingly attempting to negotiate similar bond terms with their banks and direct lenders. As a result, lenders are facing pressure to adapt and incorporate these bond-like terms to remain competitive and attractive to shipowners.

Conclusion

The past year has seen considerable evolution in the ship finance market. European bank lending faces uncertainty with the introduction of Basel IV, prompting a more selective approach to borrowers with better credit ratings. Revolving credit facilities are in vogue among well-capitalized shipowners seeking flexibility. Direct lenders are not only growing in numbers but also in ambition and are now courting established industry names. Meanwhile, the introduction of the now-suspended USTR port fees brought a wave of interest in moving away from Chinese sale-leaseback financing structures. As 2026 unfolds, adaptability and a nuanced understanding of both traditional and alternative finance options will be essential for shipowners, investors and lenders navigating this shifting landscape.
Source: Holland & Knight LLP