Two New Cruise Lines Unexpectedly Impacted by Russian Sanctions

cruise ships leased from Russian fiance company
Swan Hellenic's new expedition cruise ship SH Minerva was being leased from Russia's GTLK (Swan Hellenic)

Published Apr 19, 2022 4:36 PM by The Maritime Executive

Two new cruise operations found themselves the unintended targets of the international sanctions imposed on Russia and its financial institutions after the invasion of Ukraine. While many of the worlds’ cruise lines scheduled to operate in Europe this summer have been working to reorganize itineraries to replace ports, especially in the eastern Baltic, Swan Hellenic and Havila Voyages have the added challenge that they had financed their new ships through Russia’s GTLK, a well-established financier to the maritime industry.

Many people were surprised that GTLK, the State Transport Leasing Company, and its subsidiaries in Europe and Asia, were not included in the early rounds of sanctions led by the United States and European Union. Many of Russia’s banks and their leasing arms were included in the first rounds of sanctions but GTLK, which is under the direct control of Russia’s Ministry of Transport and has a large portfolio in transportation rolling stock, aviation, and maritime leasing was not targeted until April 8.

Both of the cruise operators however had anticipated that GTLK from which they are leasing their vessels would likely be part of the sanctions. Finnvera and Finnish Export Credit granted an Export Credit and a Buyer Credit Guarantee to a division of GTLK in December 2021 valued at over $200 million for two cruise ships being built at Helsinki Shipyard for Swan Hellenic. The 12-year agreements were for the SH Minerva which was delivered to Swan Hellenic late in 2021 and a sister ship SH Vega which was recently floated out at the shipyard. 

“The leasing agreements between Swan Hellenic and the subsidiaries of JSC GTLK each provided for a purchase option. We exercised these irrevocable purchase options at a relatively early stage well before the recent EU decision,” explains a spokesperson for Swan Hellenic. On March 13 for SH Minerva and on March 31, for SH Vega, the company notified GTLK as the leaseholder that it was exercising its options to buy the vessels. “The legal procedures transferring ownership of the vessels to Swan Hellenic are now therefore at an advanced stage and due to be completed imminently,” the company says while noting that Swan Hellenic and its subsidiaries, banks, or sub-contractors were not cited in the sanctions.

Swan Hellenic reports that operations of its first cruise ship are continuing and the second vessel is due to start her maiden voyage at the end of May. A third, larger cruise ship, recently named SH Diana is under construction and due to be delivered early in 2023. 

Norway’s Havila Voyages, however, said today, “Havila Capella was temporarily taken out of service on Thursday, April 14th after conditions in the company's financing meant that the ship's insurance was affected by sanctions against Russia.” Havila launched its coastal voyages late in 2021 with the first of four cruise ships, with the plan to lease all the ships from subsidiaries of GTLK. A Hong Kong-based leasing company, which is a subsidiary of GTLK, took delivery of the ship from the Tersan shipyard and is leasing it to Havila, which notes that the ship is registered and operates under Norwegian regulations. However, uncertainties in the sanctions caused issues with their liability insurance and forced the ship to cancel its scheduled departure from Bergen.

“Havila Kystruten is working along all conceivable channels to find a short-term solution to get Havila Capella back into operation as soon as possible,” the company wrote in a stock exchange filing on April 19. “In the company's assessment, a short-term solution requires the participation of the Norwegian authorities in relation to sanctions against Russia.”

They anticipated the potential issues with the financing of the vessels and reported in March they began working to refinance the one ship that has been delivered and three still under construction in Turkey and currently owned by Tersan. They, however, did not anticipate the insurance issue and found themselves caught in a loophole that prevents the ship from sailing. Saying that the ship is Norwegian except for rent payments being sent to the GTLK subsidiary, Havila is proposing a temporary solution to resume sailing. The company is also days away from the scheduled delivery of its second vessel which is due to enter service next month. The third and fourth vessels are due to be completed later this year.