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CS Professional · IFSCA - Regulations, Listing and Compliances · Banking Services and Finance Companies in IFSC

Coastal Carriers Ltd owns a vessel but needs cash for working capital. It sells the vessel to a ship-leasing finance company in GIFT IFSC and immediately takes it back on a long lease, continuing to operate it on the same routes. What is the main effect of this sale and leaseback?

A sale and leaseback lets Coastal Carriers unlock the capital tied up in the vessel while still using it. The IFSC lessor becomes the owner and receives rentals, while the original owner continues operating the ship.

  1. ACoastal Carriers loses the right to use the vessel but keeps the sale proceeds
  2. BThe leasing company becomes the operator and crews the vessel itself
  3. CCoastal Carriers releases capital locked in the vessel while continuing to use itCorrect
  4. DThe transaction is a charter of an unbuilt vessel with no ownership change

Explanation

In a sale and leaseback the owner sells the asset to a lessor and leases it back. The seller gets cash while keeping use of the vessel, paying rentals. The right of use is not lost, and the lessor does not become the operator.

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