Business model behind SunStone Ships’ newbuilds boosts cruise construction in China

Business and finance model involved in SunStone Ships’ newbuild contracts to open doors for many more Chinese shipyard cruise and ferry contracts

A ground-breaking business model has been launched that will pave the way for passenger ships to be built by Chinese shipyards. The passenger ship business and building model was behind SunStone Ships expedition cruise newbuild contract with China Merchants Industry Holdings.

Tillberg & Reyes Group president Carlos H Reyes and general manager Andrew Zhang were behind the model and brokered this contract. The company is also involved in the Viking Line project at China’s Xiamen Shipbuilding Industry Co by supporting the shipyard. The fact that shipyards do not have experience of building passenger vessels is a major obstacle for an owner to make the decision to build in China.

But using a comprehensive plan such as Mr Reyes’ model gives confidence to the owner. It also involves European companies in the building of the vessel.

One of the most important things about the model is its financial terms. Mr Reyes told Passenger Ship Technology: “We had to create a financial model that was not only attractive in terms of price, but more important, extremely attractive in terms of finance.” The model leverages the differences in the common financial practices in different regions.

In many countries in Europe the usual maturity term of a loan for a newbuild ship is 12 years with a down payment of at least 20%. But China is not bound by the same financial regulations – it can stretch from 12 to 15 years and 20% down payment isn’t mandatory.

Mr Reyes and Mr Zhang are using their business model to broker more deals between western passenger ship operators and Chinese shipyards – and are already in negotiations with other cruise operators. There is no doubt that this model will draw in many more passenger ship newbuild contracts to China.