Act on a Ship Financing Institute

Act on a Ship Financing Institute 1)

Hereby is published the Act on a Ship Financing Institute, cf. Act No. 1873 of 5 December 2023, with the amendments resulting from Section 12 of Act No. 481 of 22 May 2024 and Section 13 of Act No. 712 of 20 June 2025.

Section 1. The Minister of Industry is authorized, after consultation with the Minister for Finance, to approve the establishment of a Ship Financing Institute.

Subsection 2. The name of the Institute must be approved by the Minister of Industry.

Section 1a. The purpose of the Institute is to carry out ship financing activities. By this activity is meant financing and related financial services in connection with

1. newbuilding and reconstruction of ships, and
2. purchase, sale, and refinancing of ships.

Subsection 2. The Institute may carry out its ship financing activities wholly or partially through subsidiaries.

Subsection 3. The Institute may only grant loans against security.

Subsection 4. The Institute may provide guarantees in accordance with the purpose of the Institute's activities.

Section 1b. By "outgoing net cash flows" in this Act is meant all outgoing payment flows that fall due on a given day, including principal and interest payments as well as payments under derivative contracts linked to the issuance of ship credit bonds and covered bonds, minus all incoming payment flows that fall due on the same day for claims related to the underlying assets.

Section 2. (Repealed)

Section 2a. The Institute may issue ship credit bonds. Ship credit bonds may bear the designation European Covered Bond.

Subsection 2. All payment obligations relating to ship credit bonds must be covered by payment claims relating to the underlying assets in the individual capital centers. In calculating the payment obligations relating to the issued ship credit bonds, there shall be included payment obligations in the form of principal and interest, payment obligations under financial instruments used to hedge risks between the underlying assets and the issued ship credit bonds, and the expected costs associated with maintenance and management upon the winding up of the individual capital centers. In calculating the payment claims relating to the underlying assets, there shall be included payment claims in the form of principal and interest on loans, payment claims under financial instruments used to hedge risks between the underlying assets and the issued ship credit bonds, and payment claims under other assets securing the ship credit bonds.

Subsection 3. The nominal value of the total principal of the underlying assets must correspond to or exceed the total principal of the issued ship credit bonds in the individual capital centers.

Subsection 4. Financial instruments used to hedge risks between the underlying assets and the issued ship credit bonds must be measured using the same method as the underlying assets and the issued ship credit bonds whose risks they hedge.

Section 2b. The Institute may issue other bonds than ship credit bonds and covered bonds.

Section 2c. The Minister of Industry may permit the Institute to issue covered bonds.

Subsection 2. If the Institute has permission to issue covered bonds, the permission may be withdrawn if

1. the Institute commits serious or repeated breaches of Sections 2d, 2i, and 2j or rules regarding covered bonds established pursuant to Section 5, or
2. the issuance of covered bonds has not commenced, at the latest 12 months after the Institute has been granted permission pursuant to subsection 1.

Section 2d. The Institute may finance loans against security in the asset types listed in Article 129, subsection 1, points (a)-(c) and (g), and subsection 2, of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms regarding the issuance of covered bonds. When issuing covered bonds against loans secured by mortgages on ships, the registration must take place in the Danish Ship Register, the Danish International Ship Register, or another internationally recognized ship register offering equivalent security. The Institute may also grant construction loans for the financing of newbuilding or reconstruction of ships, which are granted without mortgage on the ship but against security in the asset types mentioned in the first sentence.

Subsection 2. All payment obligations relating to covered bonds must be covered by payment claims relating to the underlying assets in the individual capital centers. In calculating the payment obligations relating to the issued covered bonds, there shall be included payment obligations in the form of principal and interest, payment obligations under financial instruments used to hedge risks between the underlying assets and the issued covered bonds, and the expected costs associated with maintenance and management upon the winding up of the capital center. In calculating the payment claims relating to the underlying assets, there shall be included payment claims in the form of principal and interest on loans, payment claims under financial instruments used to hedge risks between the underlying assets and the issued covered bonds, and payment claims under other assets securing the covered bonds.

Subsection 3. The nominal value of the total principal of the underlying assets must correspond to or exceed the total principal of the issued covered bonds. The nominal value of the total principal of the underlying assets must be supplemented by an overcollateralization of at least 2% of the outstanding covered bonds.

Subsection 4. Financial instruments used to hedge risks between the underlying assets and the issued covered bonds must be measured using the same method as the underlying assets and the issued covered bonds whose risks they hedge.

Section 2e. Issuance of ship credit bonds may take place in separate capital centers. Issuance of covered bonds must take place in separate capital centers. Issuance of ship credit bonds and covered bonds must not take place in the same capital center.

Subsection 2. The capital center must at all times have a liquidity buffer composed of liquid assets available to cover outgoing net cash flows in connection with the capital center, covering the total maximum outgoing net cash flows for the next 180 days.

Subsection 3. Liquid assets pursuant to subsection 2 include assets that meet the conditions for Level 1, Level 2A, or Level 2B assets according to Commission Delegated Regulation (EU) No 2015/61 of 10 October 2014 supplementing Regulation (EU) No 575/2013 as regards liquidity coverage requirements for credit institutions, and which are valued in accordance with the aforementioned delegated regulation, and are not issued by the credit institution itself issuing the covered bonds, or by its parent company, unless this is a public entity that is not a credit institution, its subsidiaries, or other subsidiaries of the parent company.

Subsection 4. The bondholders may only assert their claims against the relevant capital center, cf. however Section 3c, subsection 5.

Section 2f. The borrower is personally liable to the capital center or the Institute otherwise for the loan. Furthermore, the capital center or the Institute otherwise may seek satisfaction for the loan in the mortgaged property.

Subsection 2. For the obligations the Institute has otherwise undertaken, the capital centers and the borrowers are not liable.

Section 2g. The income of a capital center consists of interest and similar income from mortgages, fees, income relating to financial instruments and similar income, and returns on the capital center's assets and off-balance sheet items.

Subsection 2. The expenses of a capital center consist of interest and similar expenses on issued bonds, administrative expenses, etc., expenses relating to financial instruments, expenses associated with raising and servicing hybrid core capital and subordinated debt, losses and provisions for probable losses on the capital center's assets and off-balance sheet items, and the Institute's share of tax.

Section 2h. The funds of the capital center must be kept separate from other funds in the Institute.

Subsection 2. Funds must be transferred to a capital center from the Institute otherwise if necessary to meet the solvency requirement for the capital center, unless such a transfer would mean that the Institute otherwise can no longer meet the solvency requirement.

Subsection 3. The Institute may transfer funds from a capital center to the Institute otherwise if the capital center is or becomes larger than required.

Subsection 4. Financial instruments may only be included as assets or liabilities in a capital center if they are used to hedge risks between assets relating to the capital center on the one hand and the issued ship credit bonds or covered bonds on the other hand, and where it is stipulated in the agreement on the financial instrument that the Institute's restructuring proceedings, bankruptcy, or failure to provide supplementary security pursuant to Section 2i, subsection 1, do not constitute a ground for default.

Section 2i. If the value of the assets mentioned in Section 2d, subsection 2, no longer corresponds to the value of the issued covered bonds or does not comply with the loan limit for them, the Institute must provide supplementary security to meet the requirement and notify the Danish Financial Supervisory Authority thereof. Supplementary security must be provided in the form of the asset types listed in Article 129, subsection 1, points (a)-(c) and (g), and subsection 2, of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

Subsection 2. If the Institute does not provide supplementary security pursuant to subsection 1, first sentence, all bonds issued in the relevant capital center lose the designation covered bonds. Bonds that lose the designation covered bonds may be designated ship credit bonds if they meet the legislative requirements for ship credit bonds at the time of the loan offer.

Subsection 3. The Danish Financial Supervisory Authority may grant a dispensation from subsection 2, second sentence, even if the bonds do not meet the legislative requirements for ship credit bonds. Capital centers that revert to the designation ship credit bonds pursuant to the first sentence must be kept separate from other funds in the Institute. Supplementary security already provided, cf. subsection 1, first sentence, belongs to the capital center that has been reclassified pursuant to subsection 2.

Subsection 4. If the bonds subsequently again meet the requirements for covered bonds, the Danish Financial Supervisory Authority may permit the bonds to again be designated covered bonds.

Subsection 5. Security provided pursuant to subsection 1 cannot be set aside pursuant to Section 70 or Section 72 of the Bankruptcy Act. However, set-aside may occur pursuant to the aforementioned provisions if the provision of security did not appear to be ordinary.

Section 2j. The Institute may take out loans to meet the requirement to provide supplementary security, cf. Section 2i, subsection 1, or to increase the overcollateralization in a capital center.

Subsection 2. It must appear from the loan agreement which capital center the loan funds raised pursuant to subsection 1 can be attributed to.

Subsection 3. Loan funds raised pursuant to subsection 1 must be placed in the asset types mentioned in Article 129, subsection 1, points (a)-(c) and (g), and subsection 2, of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms. The assets must from the time the loan is taken out be placed in a separate account, in a separate depot, or otherwise marked as originating from the relevant loan. When the assets are used as supplementary security or as overcollateralization, they must be included in the relevant capital center.

Section 3. The debt certificates issued to the Institute by the borrowers serve as security for the Institute's obligations. The debt certificates must be issued on such terms that the services under them will on average provide adequate coverage for the Institute's ongoing obligations.

Section 3a. If the Institute is declared bankrupt, the funds of the capital centers calculated after deduction of expenses for the administration of the bankruptcy estate and similar, including expenses for the trustee, personnel, etc., are used to pay claims from holders of ship credit bonds and covered bonds in the relevant capital center and claims on the interest that has accrued from the pronouncement of the bankruptcy decree, on the aforementioned claims. Thereafter, creditors pursuant to Section 2j, subsection 1, are covered. Excess funds then enter the bankruptcy estate, cf. Section 32 of the Bankruptcy Act.

Subsection 2. If the Institute is declared bankrupt, the funds calculated after deduction of expenses for the administration of the bankruptcy estate and similar, including expenses for the trustee, personnel, etc., in the Institute otherwise are used to pay claims from holders of cash bonds and ship credit bonds that were not issued through a capital center, and claims on the interest that has accrued from the pronouncement of the bankruptcy decree, on the aforementioned claims. Funds used pursuant to the first sentence may, however, not exceed the assets corresponding to the cash bonds or ship credit bonds, including the mortgages belonging to the Institute, deposits, financial instruments, and an amount corresponding to 8% of the risk-weighted value of the assets corresponding to the cash bonds and ship credit bonds that the Institute may have issued outside capital centers. Excess funds then enter the bankruptcy estate, cf. Section 32 of the Bankruptcy Act.

Subsection 3. If the Institute is declared bankrupt, counterparties on financial instruments entered into to hedge risks in a capital center, cf. Section 2h, subsection 4, are treated in bankruptcy law as equivalent to the holders of the bonds in the relevant capital center, cf. subsection 1, first sentence, and Section 3c, subsections 5-7. Counterparties on financial instruments entered into to hedge risks between loans and cash bonds or ship credit bonds that are not issued through a capital center are treated in bankruptcy law as equivalent to the holders of the cash bonds or ship credit bonds if it is stipulated in the agreement on the financial instrument that the Institute's restructuring proceedings or bankruptcy do not constitute a ground for default, cf. subsection 2 and Section 3c, subsections 5-7.

Section 3b. Holders of cash bonds, ship credit bonds, or covered bonds or lenders pursuant to Section 2j, subsection 1, cannot invoke the pronouncement of a bankruptcy decree over the Institute as a cause for early settlement of payment obligations. The pronouncement of a bankruptcy decree over the Institute does not deprive the Institute's borrowers of the right to make full or partial settlement of loans in accordance with the settlement terms applicable to the loan.

Subsection 2. If the Institute fails to comply with the obligation in Section 2i, subsection 1, this cannot be invoked by holders of covered bonds or lenders pursuant to Section 2j, subsection 1, as a cause for early settlement of payment obligations.

Section 3c. The bankruptcy estate cannot pay a service to meet claims from holders of cash bonds, ship credit bonds, or covered bonds at an earlier time than the Institute was entitled to discharge itself by paying the service.

Subsection 2. The bankruptcy estate cannot terminate loan agreements secured by mortgages on ships to a greater extent than was permissible for the Institute.

Subsection 3. The bankruptcy estate cannot change contributions and similar.

Subsection 4. Set-off from a creditor as referred to in Section 42 of the Bankruptcy Act cannot take place to meet a claim that belongs to the Institute.

Subsection 5. The bankruptcy estate is used to pay claims in accordance with the rules in Chapter 10 of the Bankruptcy Act. Remaining claims from holders of cash bonds, ship credit bonds, and covered bonds and claims on the interest that has accrued from the pronouncement of the bankruptcy decree, on the aforementioned claims, are paid pro rata according to the claims mentioned in Section 96 of the Bankruptcy Act, but before the claims mentioned in Section 97 of the Bankruptcy Act.

Subsection 6. In restructuring proceedings, the Institute must, to the greatest possible extent, continue to fulfill its payment obligations according to claims from holders of cash bonds, ship credit bonds, and covered bonds and claims from creditors according to agreements on financial instruments entered into by the Institute to hedge risks between assets and issued bonds at maturity, unless the restructuring administrator determines otherwise. With the consent of the restructuring administrator, the Institute may enter into agreements on financial instruments, take out loans for the payments mentioned in the first sentence, and provide security for such loans in assets other than claims secured by mortgages on ships.

Subsection 7. In bankruptcy, the trustee must, to the greatest possible extent, continue or resume the servicing of the Institute's obligations in the form of interest and repayments to holders of cash bonds, ship credit bonds, and covered bonds and claims from creditors according to agreements on financial instruments entered into by the Institute to hedge risks between assets and issued bonds. To the extent that there are insufficient funds, interest is paid before withdrawals or other repayment of principal is made. The trustee may enter into agreements on financial instruments, take out loans for payments to holders of cash bonds, ship credit bonds, and covered bonds and claims from creditors according to agreements on financial instruments entered into by the Institute to hedge risks between assets and issued bonds, and provide security for such loans in assets other than claims secured by mortgages on ships.

Subsection 8. No transfer of funds from one capital center to another or to the Institute otherwise may take place after the initiation of restructuring proceedings or the pronouncement of a bankruptcy decree.

Section 3d. Holders of bonds that have lost the designation covered bonds, cf. Section 2i, subsection 2, and counterparties on the financial instruments retain the bankruptcy law position assigned to holders of covered bonds and financial counterparties, cf. Section 3a. The same applies to the coverage of debt that the Institute has taken out for the purpose of providing supplementary security, cf. Section 2j, subsection 1.

Subsection 2. The rules in Sections 3b, 3c, and 3e apply correspondingly to bonds that have lost the designation covered bonds and financial instruments linked thereto.

Section 3e. The proceeds from loans that the Institute has taken out pursuant to Section 2j, subsection 1, and which do not enter a capital center, must in the event of the Institute's bankruptcy serve to cover the holders of ship credit bonds, covered bonds, and counterparties on the financial instruments in the capital center to which the loan was taken out. Any excess funds must be paid to the lender.

Section 4. The Danish Financial Supervisory Authority ensures compliance with this Act and the rules issued pursuant to the Act. The Danish Financial Supervisory Authority also ensures compliance with the Regulation of the European Parliament and of the Council on the creation of a common European access point, which provides centralized access to publicly available information relevant to financial services, capital markets, and sustainability, and rules issued pursuant thereto.

Subsection 2. The rules in Chapters 21 and 23 of the Act on Financial Business apply correspondingly to the Institute.

Subsection 3. The Institute pays a fee to the Danish Financial Supervisory Authority. The fee is determined according to Chapter 22 of the Act on Financial Business.

Section 4a. The Danish Financial Supervisory Authority is the collecting body for the information that must be submitted to make them accessible on the common European access point (ESAP). This applies to information that must be submitted in accordance with this Act and rules issued pursuant thereto.

Subsection 2. The Danish Financial Supervisory Authority is furthermore the collecting body for the information submitted on a voluntary basis to make them accessible on the common European access point (ESAP), cf. Article 3, subsection 1, of the Regulation of the European Parliament and of the Council on the creation of a common European access point, which provides centralized access to publicly available information relevant to financial services, capital markets, and sustainability.

Section 5. The Minister of Industry may establish rules on

1. fair business practices and good practice as well as price information,
2. ownership, management, governance, and organization of the business, including a reporting scheme regarding breaches or potential breaches of financial regulation, and remuneration,
3. disclosure of confidential information,
4. security, valuation, loan limits, maturity, and fleet mortgage,
5. capital, solvency, and group relationships,
6. placement of funds and liquidity,
7. accounts and audit,
8. capital centers,
9. merger, termination, and crisis management,
10. reports, and
11. the Ship Financing Institute's publication and submission of information for use by investors in assessing the characteristics and risks of the issued ship credit bonds and covered bonds.

Subsection 2. The Minister of Industry may establish that provisions in the Act on Financial Business, the Act on Mortgage Loans and Mortgage Bonds, etc., and Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and rules established pursuant to these laws and the regulation shall apply correspondingly to the Institute regarding the matters mentioned in subsection 1, items 1-10.

Subsection 3. The Danish Financial Supervisory Authority establishes detailed rules on,

1. under what conditions bonds can obtain and retain the designation covered bonds,
2. maturities and loan limits for loans financed by the issuance of covered bonds,
3. valuation of the assets securing the issuance of covered bonds,
4. valuation of the issued covered bonds and the continuous calculation of the value of the assets in relation to the covered bonds,
5. under what conditions construction loans for newbuilding or reconstruction of ships may be granted, cf. Section 2d, subsection 1, item 2, of the Act on Financial Business,
6. limitation of risks in connection with bond issuance...