Marine Finance 101: Buying A Cruise Ship

John Konrad
Total Views: 10
December 5, 2008

Photo by Crusair

Eurodam News, a blog following the construction of the brand new Holland America Lines’ cruise ship M/V Eurodam, recently featured a very interesting post by the company’s director of budgets and planning Tim Murphy. The subject: How To Buy A Cruise Ship. Murphy writes:

“First, you make an economic decision about whether you need a new ship,” Murphy said. “Then you negotiate a price with the shipyard. Generally, you then make a down payment, usually in the range of 5 percent. Then there is a series of staged payments while the ship is being built, with a final big payoff at the time the ship is delivered.”

Murphy said that Eurodam is being financed by Holland America Line through Carnival Corporation’s ownership of the company. “We are in the enviable position that we can self-finance a new cruise ship due to our parent company’s strong balance sheet and solid cash flow,” he said.

Another of Murphy’s areas of responsibility is warranties. A cruise ship is a very large, complex machine made up of lots of smaller systems and moving parts, and just like with a new car, the owner is going to want warranties for a set time period in the event that there are problems with any parts or systems.

“Pretty much everything on board that’s not a consumable, like light bulbs and that kind of thing, is under warranty for a year,” said Murphy. “Larger, more complex and more critical systems like the engines or water treatment plant would have an extended warranty.”

Before the line takes possession of the ship from the shipyard, any outstanding warranty issues are negotiated and a pre-delivery list of things that still need to be done such as painting, laying carpet or other cosmetic finishes is made and the shipyard is obligated to finish those tasks as soon as possible.

You can read the entire article HERE.

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