Aiming for Efficiency
MARAD bringing ship financing program out from under cloud of defaults
BY JOHN C. MARCARIO, Assistant Editor
Despite the jobs created as a
result of the loan guarantees — an
estimated 5,520 in 2011 — and
business generated at U.S. shipyards — an estimated $354 million
in 2009, according to MARAD —
the program has struggled with loan
defaults and consistency on the
number of yearly loan guarantees.
From 1994 to 2003, the program
guaranteed 108 loans for more than
From February 1998 through April 2002, nine borrowers defaulted on approximately $490 million in
loans. And from August 2008 through January 2010,
six more borrowers defaulted on approximately $305
million in loans, according to a Dec. 7, 2010, report,
“Title XI Loan Guarantee Program: Actions Are
Needed To Fully Address OIG’s Recommendations,”
issued by the Department of Transportation’s Office of
the Inspector General (OIG).
The program had been suspended after 1986, when
loan defaults totaled $1.2 billion. It was restarted in 1993.
The report concluded that the loan guarantee pro-
gram still needs improvement and, “MARAD must
ensure that it implements consistent policies and pro-
cedures, and maintains ready access to important
financial information on Title XI borrowers and their
In March 1, 2011, testimony before the House
Transportation and Infrastructure subcommittee on
Coast Guard and maritime transportation, Maritime
The Maritime Administration has a financing program designed to
promote the growth and modernization of the U.S. Merchant
Marine fleet and U.S. shipyards.
■ In 2011, the program created an estimated 5,520 jobs in the U.S.
■ Three companies received loans in 2011 totaling $798 million
for shipyard and vessel projects.
■ The program has had 15 borrowers default on loans since 1998,
totaling nearly $1 billion.
The Maritime Administration’s (MARAD’s) Title XI Federal Ship Financing Program has created thousands of jobs over the past year,
but it also has faced scrutiny from government watchdogs for mismanagement and loan defaults.
The program enables owners of eligible vessels and
shipyards to obtain long-term financing with attractive
terms. The loan guarantees are for 87.5 percent of the
actual value of the project. The program’s current portfolio is a little less than $2 billion but has funding to
expand to $4 billion.
“The Title XI loan guarantee program, when administered using sound underwriting criteria and efficient
procedures, provides important financial backing for
economically sound projects at American shipyards
and little to no cost to taxpayers, during a time when
we really need that. These, and other programs, as well
as a commitment to maintain an internationally competitive tax policy, are vitally important to maintaining
and growing jobs in the American maritime industry,”
said Michael Roberts, senior vice president, general
counsel and corporate secretary of Jacksonville, Fla.-based Crowley Holdings Inc., which received one of
three loans given out in 2011.