Maritime Administration, DOT § 298.13

(4) In the case of an Eligible Ship- nents and services from Actual Cost, yard, which is an applicant for a guar- unless we specifically grant a waiver antee for a Shipyard Project, a detailed for the item. We will not grant a waiv- statement must be submitted showing er for major foreign components of the your ability to successfully operate the hull and superstructure. Shipyard Project and construct/recon- (ii) In deciding whether to grant a struct Vessels, including name, edu- waiver for foreign components and cation, background of, and licenses services, we will consider your certifi- held by, all senior supervisory per- cation, to be reviewed by us, stating sonnel concerned with the physical op- that: eration of the Shipyard Project. (A) A foreign item or service is not (5) Where an operator has an histor- available in the United States on a ical performance record, we will con- timely or price-competitive basis, or sider this record in evaluating your op- (B) The domestic item or service is erating ability. For newly formed enti- not of sufficient quality. ties, we will evaluate the performance (iii) Although excluded from Actual of affiliates and/or companies associ- Cost, foreign components of the hull ated with the principals (where the and superstructure can be regarded as principals have a significant degree of owner-furnished equipment that may control) in determining your operating be used in satisfying your equity re- ability. However, unless the affiliates quirements imposed by paragraph (f) of or principals have an obligation with this section. respect to the debt, we will not con- (3) Costs incurred by written contracts. sider historical performance in evalu- If any of the costs have been incurred ating your creditworthiness. by written contracts such as shipyard contract, management or operating § 298.13 Financial requirements. agreement, you should forward signed (a) In general. To be eligible for guar- copies with the application. We may re- antees, you and/or your parent organi- quire you to have the contracting ship- zation (when applicable), and any other yard submit back-up cost details and participants in the project having a technical data. You must submit this significant financial or contractual re- information in the format given in the lationship with you must submit infor- Title XI application procedures. mation, respectively, on their financial (4) Shipyard Project. In the case of condition. You must submit this infor- Shipyard Project, a detailed statement mation at the time of the application. of the actual cost of such technology, You must supplement this information including those items which would nor- if we require it in subsequent requests. mally be capitalizable. If you incurred You must submit information satisfac- any of the costs through written con- tory to us to show that financial re- tracts, you should forward signed cop- sources are available to support the ies of the contract with the applica- Title XI project. tion. We may require you to have man- (b) Cost of the project. You must sub- ufacturers submit back-up cost details mit the following cost information and technical data. You must submit with respect to the project: this information in the format given in (1) Vessel financing Guarantees. A de- the Title XI application procedures. tailed statement of the estimated Ac- (5) Shore facilities, cargo containers, tual Cost of construction, reconstruc- etc. A detailed statement showing the tion, or reconditioning of the Vessel(s) actual cost of any shore facilities, including those items which would nor- cargo containers, etc., required to be mally be capitalized as Vessel con- purchased in conjunction with the struction costs. Net interest during project. construction is the total estimated (6) Additional project costs. A detailed construction period interest on non-eq- statement showing any other costs as- uity funds less estimated earnings from sociated with the project which were the escrow fund, if such fund is to be not included in paragraphs (b)(1) established prior to Vessel(s) delivery. through (5) of this section, such as: (2) Foreign components. (i) You must (i) Legal and accounting fees; exclude each item of foreign compo- (ii) Printing costs;

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(iii) Vessel insurance; and Internet) for transmission of re- (iv) Underwriting fees; quired information to MARAD, if prac- (v) Fee to a Related Party; and ticable.]: (vi) Other fees. (i) The most recent financial state- (7) Request for Actual Cost Approval ments for you, your parent company and Reimbursement. If the project in- and other significant participants, as volves refinancing, you must also sub- applicable (year end or intermediate), mit the exhibit entitled Request for and the three most recent audited Actual Cost Approval and Reimburse- statements with details of all existing ment, its summary sheet and supple- debt. If you are a new entity and are to mental schedules at the time of filing be funded from or guaranteed by exter- the application. nal source(s), you must provide such (c) Financing. (1) You must: statements for such source(s); (i) Describe, in detail, how the costs (ii) Your pro forma balance sheet and of the project (sums referred to in para- that of any guarantor (if applicable) as graph (b) of this section) will be funded of the estimated date of execution of and the timing of such funding. the Guarantees reflecting the assump- (ii) Include any vessel trade-ins, re- tion of the Title XI Obligations, includ- lated or third party financings, etc. ing the current liability; and (iii) Provide the proposed terms and (iii) Your pro forma balance sheets conditions of all private funding, from and that of the guarantor (if applica- both equity and debt sources and clear- ble) for five years after the Closing. ly identify all parties involved. (iv) Obtain our approval of the terms (Approved by the Office of Management and and conditions for co-financing (involv- Budget under control number 2133–0005) ing a blend of Title XI and private fi- (d) Financial definitions. For the pur- nancing for the debt portion), including pose of this section and §§ 298.35 and the ability of the co-financiers to exer- 298.42 of this part: cise their rights against collateral (1) Company means any Person sub- shared with us for any transaction. ‘‘ ’’ (v) Demonstrate with financial state- ject to financial requirements imposed under paragraph (f) of this section and ments that at least 121⁄2 percent, or 25 percent as applicable, of the construc- in § 298.35, as well as the reporting re- tion or reconstruction costs of the Ves- quirements imposed by § 298.42. sel(s) or the cost of the Shipyard (2) ‘‘Working Capital’’ means the ex- Project will be in the form of equity cess, if any, of current assets over cur- and not additional debt, except to the rent liabilities, both determined in ac- extent allowed by paragraph (h) of this cordance with GAAP and adjusted as section. follows: (vi) Disclose all of the Vessel(s), (i) In determining current assets you Shipyard Project financing in the for- must exclude: mat given in the Title XI application (A) Any securities, obligations or evi- procedures. dence of indebtedness of a Related (2) Financial Information. You must Party or of any stockholder, director, provide us with financial statements, officer or employee (or any member of prepared in accordance with U.S. gen- his family) of the Company or of such erally accepted accounting principles Related Party, except advances to (GAAP), and include notes that explain agents required for the normal current the basis for arriving at the figures ex- operation of the Company’s vessels and cept that for Eligible Export Vessels, current receivables arising out of the your financial statements must be in ordinary course of business and not accordance with GAAP if formed in the outstanding for more than 60 days; and U.S., or reconciled to GAAP if formed (B) An amount equal to any excess of in a foreign country unless a satisfac- unterminated voyage revenue over tory justification is provided explain- unterminated voyage expenses. ing the inability to reconcile. The fi- (ii) In determining current liabilities, nancial statements must include the you must deduct any excess of following [Note: MARAD will accept unterminated voyage expenses over electronic options (such as facsimile unterminated voyage revenue and add

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one half of all annual charter hire and owner, the operator and other parties other lease obligations (having a term as determined by us. of more than six months) due and pay- (2) The Company must satisfy the ap- able within the succeeding fiscal year, plicable financial requirements, in ad- other than charter hire and such other dition to any other financial require- lease obligations already included and ments already imposed or which may reported as a current liability on the be imposed upon it in connection with Company’s balance sheet. other Vessels financed under the Title (3) ‘‘Equity’’ or ‘‘net worth’’ means, as XI program or in connection with other of any date, (the total of paid-in-cap- Shipyard Project financed under the ital stock, paid-in surplus, earned sur- Title XI program. plus and appropriated surplus,) and all (3) A determination as to whether the other amounts that would be included Company has satisfied all financial re- in net worth in accordance with GAAP, quirements shall be based on the as- but does not include: sumption that the projected financing (i) Any receivables from any stock- has been completed. Accordingly, you holder, director, Officer or employee must submit: (or their family) of the Company or (i) A pro forma balance sheet at the from any Related Party (other than time of the application, reflecting any current receivables arising out of the adjustment made pursuant to para- ordinary course of business and not graph (f)(1)(i) of this section, and outstanding for more than 60 days), and (ii) A revised pro forma balance (ii) Any increment resulting from the sheet, reflecting the completion of the reappraisal of assets. projected financing, at least five busi- (4) ‘‘Long-Term Debt’’ means, as of ness days before the first Closing at any date, the total notes, bonds, deben- which the Obligations are issued. tures, equipment obligations and other (f) Financial requirements at Closing. evidence of indebtedness that would be Financial requirements can apply to included in long term debt in accord- one or more Companies, and are deter- ance with GAAP. You must include any mined as follows: guarantee or other liability for the (1) Owner as operator. Where the debt of any other Person not otherwise owner is to be the Vessel operator, included on the balance sheet. minimum requirements at Closing usu- (5) ‘‘Capitalizable Cost’’ means the ag- ally are as follows: gregate of the Actual Cost of the Ves- (i) Working Capital. The Company’s sel or Shipyard Project and those other Working Capital shall not be less than items which customarily would be cap- one dollar. This Working Capital re- italized as Vessel costs or Shipyard quirement is based on the premise that Project costs under GAAP. the Company engages in a service-type (6) ‘‘Depreciated Capitalizable Cost’’ activity with only normal vessel inven- means the Capitalizable Cost of a Ves- tory. If Working Capital includes other sel or Shipyard Project, depreciated on inventory, in addition to such normal a straightline basis over the same use- Vessel inventory, we may adjust the ful life as determined by us for Actual requirement as appropriate. Also, if we Cost, and depreciated as required by determine that the Company’s Working § 298.21(g). Capital includes amounts receivable (e) Applicability. The financial re- that it reasonably could not expect to sources must be adequate to meet the collect within one year, we may make Equity requirements in the project and adjustments to the Working Capital re- Working Capital requirements, as set quirements. forth in paragraph (f) of this section. (ii) Long-Term Debt. The Company’s (1) The various financial require- Long-Term Debt must not be greater ments shall be met by the owner of the than twice its Equity. Vessel or Vessels or Shipyard Project (iii) Equity (net worth). The Com- to be security to us for the Guarantees, pany’s Equity must be: except that if the owner is not the op- (A) The greater of: erator, the overall financial require- (1) 50 percent of its Long-Term Debt; ments will be allocated among the or

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(2) 90 percent of its Equity as shown may be satisfied by debt, fully subordi- on the last audited balance sheet, nated as to the payment of principal dated not earlier than six months be- and interest on the Secretary’s Note fore the date of issuance of the Letter and any claims secured as provided for Commitment; or in the Security Agreement or the (B) Such other amount as may be Mortgage. Repayment of subordinated specified by us. debt may be made only from funds (2) Lessee or charterer as operator. available for payment of dividends or Where a lessee or charterer is to be the for other distributions, in accordance Vessel operator, minimum require- with requirements of the Title XI Re- ments at Closing usually are as fol- serve Fund and Financial Agreement lows: (described in § 298.35). Such subordi- (i) Working Capital. The operator’s nated debt shall not be secured by any Working Capital requirement will be interest in property that is security for the same as that which would have Guarantees under Title XI, unless the otherwise been imposed on the owner Obligor and the lender enter into a as operator under paragraph (f)(1)(i) of written agreement, satisfactory to us, this section and based on the same providing, among other things, that if premise stated in that paragraph. any Title XI financing or advance by us (ii) Long-Term Debt. The operator’s to the Obligor shall occur in the future, Long-Term Debt will be the same as such security interest of the lender that which would have otherwise been shall become subordinated to any in- imposed on the owner as operator debtedness to us incurred by the Obli- under paragraph (f)(1)(ii) of this sec- gor and to any security interest ob- tion. tained by us in that property or other (iii) Equity (net worth). The opera- property, with respect to the subse- tor’s equity requirement will be the quent indebtedness. same as that which would have other- (i) Modified requirements. We may wise been imposed on the owner as op- waive or modify the financial terms or erator under paragraph (f)(1)(iii) of this requirements otherwise applicable section. under this section and §§ 298.35 and (iv) The owner’s Equity shall at least 298.42, upon determining that there is be equal to the difference between the adequate security for the Guarantees. Capitalizable Cost or Depreciated We may impose similar financial re- Capitalizable Cost of the Vessel (which- quirements on any Person providing ever is applicable) and the total other security for the Guarantees. amount of the Guarantees. (3) Owner as General Shipyard Facil- [65 FR 45152, July 20, 2000, as amended at 68 ity. Where the owner of Shipyard FR 62538, Nov. 5, 2003; 69 FR 61451, Oct. 19, Project is a General Shipyard Facility, 2004] minimum requirements at Closing will § 298.14 Economic soundness. be the same as those set forth in para- graph (f)(1) of this section for an owner (a) Economic Evaluation. We shall not as operator. issue a Letter Commitment for guaran- (g) Adjustments to financial require- tees unless we find that the proposed ments at Closing. If the owner, although project, regarding the Vessel(s) or not operating a Vessel, assumes any of Shipyard Project for which you seek the operating responsibilities, we may Title XI financing or refinancing, will adjust the respective Working Capital be economically sound. The economic and Equity requirements of the owner soundness and your ability to repay and operator, otherwise applicable the Obligations will be the primary under paragraph (f) of this section, by basis for our approval of a Letter Com- increasing the requirements of the mitment. We will consider the value of owner and decreasing those of the oper- the collateral for which we will issue ator by the same amount. the Obligations as only a secondary (h) Subordinated debt considered to be consideration in determining your abil- Equity. With our consent, part of the ity to repay the Obligations. Equity requirements applicable under (b) Basic feasibility factors. In making paragraphs (c) and (f) of this section the economic soundness findings, we

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