A new “Shipmanagers’ Letter of Undertaking” (LoU) is now available on the BIMCO website, together with Explanatory Notes. The LoU sets out shipmanagers’ obligations to lenders financing owners’ purchase of a managed vessel.
The LoU is for use where shipmanagers maintain and operate a vessel but have no financial interest in the ownership. The content has been drafted to provide a basis for discussion, thereby eliminating the need for, and cost of, negotiating every agreement from the beginning. Respective party interests are addressed and a balance has been established without the imposition of lenders’ often onerous obligations, which can adversely impact on shipmanagers’ wider business activities.
In summary, the LoU acknowledges the financing agreement between lenders and owners, and notes the shipmanagers’ role in accordance with the management agreement. A series of undertakings is given by shipmanagers, including restrictions on the extent to which they may take action for the recovery of any claims beyond an agreed level of permitted credit.
Lenders’ interests in respect of insurance are addressed through a loss payable clause thereby removing the potentially difficult issue of assignment of shipmanagers’ rights. Shipmanagers’ obligations cease on discharge of the loan or termination of the management agreement. Provisions covering governing law and jurisdiction are based on English law, although there is an option for parties to agree an alternative regime.
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