Senior secured debt

Senior secured debt is first-ranking borrowing secured on the vessel and its income, the backbone of most ship finance. The package is a first preferred or first priority ship mortgage, an assignment of earnings, an assignment of insurances, and a charge over the shares of the owning company, so the lender ranks ahead of junior and unsecured creditors and can enforce against the ship. Pricing is a margin over the benchmark rate, with a loan-to-value covenant, a minimum security value test, and scheduled amortization. Since 2019 many lenders also apply the Poseidon Principles, scoring the carbon intensity of the financed fleet.