Financing and Debt Overview

Eligibility Requirements

The Maritime Administrator will consider approval of all Federal Ship Financing Program obligation guarantees meeting the following criteria:
Obligors must –

  • Be an individual, corporation, partnership, or other business formation that is U.S. organized, domiciled and recognized as a U.S. citizen.
  • Exhibit sufficient operating experience and ability to operate the vessels or employ the new shipyard technology on an economically sound basis.
  • Exhibit creditworthiness and the ability to repay guaranteed debt according to its terms, keep a positive working capital balance and an aggregate debt level at no more than two times its net worth.


Generally include commercial vessels such as ferries, bulk, container, cargo, tankers, tugs, towboats, barges, dredges, oceanographic research, floating power barges, offshore oil rigs and support vessels, and floating drydocks.   The focus of the program is on new construction, but projects for reconstruction and/or reconditioning of existing vessels to improve efficiency and extend useful life, such as repowering to use LNG for propulsion, may also be considered.
The Vessel must –

  • Meet the American Bureau of Shipping standards or other such standards approved by the U.S. Coast Guard or, in the case of an eligible export vessel, standards imposed by an International Association of Classification Societies member to be ISO 9000 series registered or other standards acceptable to the Maritime Administration.
  • Have its design and engineering approved by the Maritime Administration. And
  • Document compliance with the Cargo Preference Act requirements for foreign materials and components included in construction.


Are limited to privately-owned, general shipyard facilities in the U.S. designed for construction, reconstruction, repair, rehabililitation, or refurbishment of vessels.  Floating drydocks, barges, or vessels which are used for vessel construction, reconstruction, repair, rehabililitation, or refurbishment are also eligible.
The Project must –

  • Demonstrate economic soundness.
  • Provide U.S. public policy benefits such as increase employment, new job creation, energy efficiency, carbon emission reduction, or serve other U.S. Executive Branch, Department of Transportation, or Maritime Administration public policy goals and objectives.
  • Enhance shipyards productivity and quality, where the Program will support investment in new technology, generally proven technology, techniques and processes. Or, novel techniques and processes designed to improve shipbuilding and related industrial production which advances the U.S. shipbuilding state-of-the-art.

Eligibility determination may also include-

  • Political export country and war risks.
  • Other U.S. public policy benefits. And
  • Risk concentration assessment.

Guaranteed Obligation Amount

  • Legislation permits guarantees for up to 87 ½ percent of the Actual Cost of certain classes of vessels
  • Actual Costs are those determined to be fair and reasonable by the Maritime Administration.
  • Actual Costs include those items which would normally be capitalized as vessel costs under U.S. generally accepted accounting principles, such as the cost of construction, reconstruction, or reconditioning (including designing, inspection, outfitting and equipping) of the vessel, together with construction period interest and the Guarantee Fee.
  • Technology costs generally includes those items which would normally be capitalized as shipbuilding technology under U.S. generally accepted accounting principles including construction period interest and the guarantee fee but excludes amounts payable to the manufacturer for early delivery of equipment and pre-delivery expenses which may not be properly capitalized as the cost of the Technology.
  • However, some capitalizable expenses are excluded from Actual Cost such as legal and accounting fees, printing costs, vessel insurance and underwriting fees, and any interest on borrowings for the shipowner’s equity in the vessels or shipyard’s equity in the Technology.
  • If a Title XI guarantee of obligations is documented after delivery of the underlying vessel or technology, or is a refinancing, Actual Costs will be reduced for depreciation from the date of delivery to the documentation date of the guarantee.

Amortization and Interest Rate

The maximum guarantee period is the lesser of 25 years or the remaining economic life of the vessel or Technology, as determined by the Maritime Administration.  The actual financing period will be based on the financial, economic, market and other critical aspects of the project.  Amortization in equal payments of principal is usually required.  However, other amortization methods such as level debt (equal payments of principal and interest) may be approved if sufficient security in the form of long-term charters, reduction in the amount of guarantee and/or the reduction in the length of the guarantee period is offered.

The interest rate of the guaranteed obligation is determined by the private sector and must be determined fair and reasonable by the Maritime Administration.  In establishing the interest rate, the obligee can generally use the rate on a U.S. Treasury security of comparable average life to that of the proposed debt issuance.  In most cases the interest rate is fixed, however, MARAD has also approved floating interest rates with restrictions.

Sources of Fund for Obligations

Funds for the guaranteed debt obligations are obtained in the private sector.  The main sources include banks, pension funds, life insurance companies and notes or bonds sold to the general public.  The Federal Ship Financing Program is a debt guarantee program only.


The Federal Ship Financing Program also allows for vessel refinancing on amounts existing on the existing Federal Ship Financing Program obligations or amounts existing on obligations not previously guaranteed up to the applicable financing level of 75% or 87.5% of the depreciated Actual Cost not to exceed the amount of the existing obligations to be refinanced.  Refinancing under the Federal Ship Financing Program must meet all of the applicable requirements of the existing regulations and statutes and the original debt must have been issued within one year after vessel delivery or within one year of the date the Technology was placed into service.

Program Fees

(See ‘Benefits and Fees’ for a detailed definition of the fees’ calculations)

Application Fee– the applicant must pay a non-refundable filing fee of $5000 with the submission of the application.

Independent Financial Advisor (IFA) Fee – depending on the type of project, an outside firm may be hired to do a separate analysis in conjunction with the analysis being done by MARAD to ensure the economic soundness of the project.  The cost of the IFA review varies based on the size and complexity of the proposed project.  The fee is non-refundable and must be paid by the applicant prior to the IFA undertaking any work.

Investigation Fee – Prior to the issuance of a Letter Commitment to guarantee obligations, an investigation fee must be paid.  The fee is based on the amount of guaranteed debt issued. Both the ‘Application Fee’ and the ‘IFA Fee’ are deducted from this fee.

Guarantee Fee – This one-time fee is paid at the time of the closing to issue the guaranteed debt.  As noted, please see the ‘Benefits and Fees’ section for a detailed explanation of how this fee is calculated.  This fee may be financed if certain conditions are met.

Benefits and Fees


  • Applicant Benefits
    • Repayment periods up to 25 years;
    • Interest rates comparable to U.S. Treasury rate for comparable-term securities;
    • Up to 87.5 percent financing;
    • Fixed or floating rates; and
    • Stimulate the growth and modernization of the U.S. Merchant Marine and U.S. shipyards.


  • Application Fee
    • $5,000 (Credited against investigation fee)
  • Investigation Fee
    • 1/2% of first $10,000,000
    • 1/8% of amount in excess of $10,000,000
  • Guarantee Fee
    • 1/2% to 1% of average amount of outstanding obligations
    • Fee determined based upon borrower’s financial condition
    • Present value of cumulative annual fees due at initial closing
    • Fee can be financed