Nishimura & Asahi and Watson Farley & Williams (WFW) have advised on the closing of Navigator Gas’ USD205.8 million Japanese operating lease with call option (JOLCO) financing for two new-build gas carriers, marking the company’s first use of the structure.
Jiangnan Shipyard and China Shipbuilding Trading is constructing the vessels, which are scheduled for delivery in 2027. Navigator is the world’s largest owner and operator of handy sized liquefied gas carriers.
The financing will initially be provided as a secured pre-delivery bridge facility arranged by BNP Paribas through its Tokyo branch, amounting to USD164.64 million and covering up to 80% of the pre-delivery instalments payable to the shipyards.
On delivery, the bridge facility will be refinanced through the JOLCO structure, under which USD205.8 million will be made available to fund the full acquisition of the vessels.
Under the JOLCO arrangement, Japanese special purpose companies will act as owners of the vessels, which will be chartered on a long-term bareboat basis to Navigator Gas subsidiaries. The acquisition will be financed through a combination of senior debt from third-party lenders and equity contributions from Japanese investors, with Navigator Gas retaining responsibility for the vessels’ commercial and technical operations.
Nishimura & Asahi represented the JOLCO owner and its parent, advising on all legal matters pertaining to the transaction. The firm’s asset finance partner Kentaro Miyagi led the team.
“These were the first JOLCO transactions for the relevant operator, and all key terms of the transaction documents had to be negotiated from scratch. As a result, reaching agreements on the transaction documentation required considerable time and significant effort from all parties involved. The vessels have not yet been delivered, and the transaction documents were only recently executed,” Miyagi told Asia Business Law Journal.
WFW advised Navigator Gas on the financing structure and documentation, with the team led by Dubai-based partner Emily Widdrington, who was supported by senior associate Elizabeth Ilett. London partner Richard Stephens provided tax advice, while Lizzie Roe, head of the firm’s Singapore office, counselled on certain aspects of the JOLCO structure.
“Our role covered ensuring that the financing structure and documentation were aligned with applicable international compliance considerations typical for a transaction involving multiple jurisdictions,” Widdrington told ABLJ.
“In addition, given the maritime context, we advised on environmental and regulatory regimes, including how EU ETS [Emissions Trading System] and Fuel EU should be dealt with in the context of the JOLCO and how these requirements interface with the financing structure and contractual risk allocation.”
Widdrington said the transaction required close co-ordination among stakeholders, given it was Navigator’s first use of the structure.
“As with many first-time structures, ensuring alignment across all stakeholders – lessors, lenders and Navigator – particularly in relation to risk allocation, documentation interfaces and timing, was a key area of focus. The execution of Navigator’s first JOLCO financing demonstrates the continued evolution and flexibility of leasing structures in the maritime sector,” she said.
