Shift in maritime lending power

How shipowners are rewriting the finance playbook
 

By Carly Fields
 

Ship finance is undergoing a structural transformation that extends far beyond the typical market cycle, according to legal experts.

In a Holland & Knight Insights article, authors Sophia Agathis, a partner at the firm, and Nicholas Kaasik, senior counsel, note that as 2026 unfolds, the ship finance industry is expected to reach a crossroad where traditional banking caution meets a surging tide of alternative credit and aggressive direct lending.

For decades, European banks have served as the bedrock of maritime capital. However, the implementation of Basel IV at the beginning of 2025 introduced a layer of complexity that is fundamentally altering the traditional lending scope. Agathis and Kaasik note that one of the “seemingly evergreen narratives” in ship finance is the still-unclear impact of Basel IV on lending by European banks. While the regulations were designed to strengthen supervision and risk management, the practical result has been a shift toward extreme conservatism.

The authors observe that this regulatory shift has led to a “more selective approach” to new ship finance deals. Rather than a broad retreat from the sector, European banks are refining their focus to a narrow band of the market. “Going forward, European banks are likely to prioritize top-tier shipowners with better credit ratings,” they said. This leaves a significant gap in the market, as for smaller owners or those with “less-predictable earnings”, access to traditional bank finance remains challenging. However, this vacuum will not stay empty for long, as the uncertain environment is prompting both lenders and borrowers to explore alternative structures and partners.

Strategic rise of revolving credit

As traditional term loans become harder to secure for all but the largest players, the nature of the debt being issued is also changing. There is a trend towards the increasing use of revolving credit facilities (RCFs) by shipowners. Once the domain of general corporate finance, RCFs are now a preferred tool for shipping companies with strong earnings and credit profiles.

The appeal lies in the operational agility these facilities provide. “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.”

Agathis and Kaasik point out that several high-profile shipowners have secured substantial RCFs recently, 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,” they said. “The preference for RCFs reflects both the stronger financial position of many shipowners and a broader industry focus on the future – shipowners recognise the cyclical nature of shipping and want to ensure liquidity for fleet renewal, expansion or opportunistic acquisitions.”

Perhaps the most dramatic shift in the last year has been the maturation of the direct lending market. Private credit funds and institutional investors are no longer merely "lenders of last resort" for distressed deals or unconventional assets. Over the past year, there has been “a marked expansion” in the role of direct lenders. These entities are now competing head-to-head with traditional ship finance banks, offering competitive terms and structuring bespoke solutions to more-established shipowners.

This growth is fuelled by a convergence of economic factors, including a higher-rate environment that has narrowed the gap between bank interest rates and the returns required by nonbank lenders. Crucially, 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”. By marketing their ability to close quickly and provide certainty of execution, these alternative providers have effectively broken the traditional bank-led paradigm.

Lease finance pivot

The geopolitical arena has also introduced volatility, specifically regarding Chinese maritime interests. The introduction, and subsequent suspension, of port fees by the US Trade Representative (USTR) sent shockwaves through the lease finance sector in early 2025. These fees “sparked a surge of interest in structuring voyage planning, ownership, management and financing arrangements to minimise the impact”, the authors said.

A primary casualty of this tension has been the Chinese sale-leaseback model. Over the last decade, these structures were popular due to high advance rates and low capital costs. However, the USTR port fees appeared to be specifically unfavourable to Chinese sale-leaseback financing structures, as the registered owner is typically a Chinese entity. “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.” While the fees are currently suspended, the time and effort expended by owners to restructure their fleets suggests a long-term cooling of interest in this specific financing avenue.

The final piece of the modern ship finance puzzle is the influence of the Nordic bond market. As one of the most active sources of capital over the past year, it has allowed shipowners to raise capital for cruise vessels and tankers with relatively light and flexible issuer covenants. This flexibility has created a "creep" effect across the industry. “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,” said the authors.

As Agathis and Kaasik conclude, the past year has seen considerable evolution in the ship finance market. From the regulatory pressures of Basel IV to the rising ambition of direct lenders, the landscape is more fragmented yet more flexible than ever before. “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,” they said.