CYPRUS Law and Practice Contributed by: Kyriacos Scordis and Sofi Mylona, SCORDIS PAPAPETROU & Co LLC
ership and mortgage information are public, certain details may be protected under privacy laws. • Ordering a transcript of the registration of a reg - istered vessel: a transcript of the registration of a registered vessel can be ordered by the public (upon payment of the prescribed fee) evidencing: (a) the particulars of the vessel; (b) the name and address of the legal owner of the vessel; and (c) the details of any registered mortgage (ie, the date and time of its registration and the details of the mortgagee). Debt financing remains the predominant form of ship finance in Cyprus. Typical loan documentation includes core commercial and operative provisions such as: • principal amount and interest; • repayment and amortisation schedule; • interest margins (for example, SOFR plus an agreed margin); • financial covenants, including minimum value clauses (loan-to-value maintenance) and minimum liquidity requirements; 2. Ship Finance and Leasing 2.1 Ship Loan Finance • security over the vessel, primarily in the form of a ship mortgage, together with assignments of earn - ings and insurances; • insurance requirements; • restrictions on sale, transfer or charter of the ves - sel; • events of default, including non-payment, breach of covenants, cross-default and arrest of the ves - sel; and • mandatory pre-payment upon sale of the vessel or total loss. Equity financing is less frequently used and is gener - ally seen in joint ventures, private equity investments and subordinated shareholder loans. Equity arrangements are typically governed by share - holders’ or joint venture agreements and include pro -
visions on capital commitments, governance and vot - ing rights, exit mechanisms and profit distribution. A Cyprus ship mortgage consists of a statutory mort - gage and collateral deed of covenants. Pursuant to the Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963, as amended, there are two types of statutory ship mortgages, namely: • a mortgage to secure principal and interest, secur - ing a fixed principal amount together with interest; and • a mortgage to secure an account current, securing fluctuating or contingent obligations. The collateral deed of covenants typically regulates, among other matters: • the payment of interest and repayment of principal; • insurance arrangements, renewals and application of insurance proceeds; • limitations on the employment of the vessel; • events of default triggering statutory or contractual enforcement rights; and • powers exercisable by the mortgagee, includ - ing the power to take possession of the vessel, assume her management and sell the vessel by private sale. The most common ship financing transactions include traditional secured ship loans, refinancing, fleet facili - ties and sale-and-leaseback structures. While the ship mortgage is the core security, lenders typically require additional security, such as: • assignment of earnings; • assignment of insurances (including H&M, P&I and war risks); • pledge of shares in the ship-owning special pur - pose vehicle; • guarantees from parent or affiliated companies; • pledges over bank accounts (including earnings and retention accounts); and • general assignment agreements covering all ship- related rights.
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