Charter-Free Valuation
The default basis for every quoted ship value: willing buyer, willing seller, no employment attached, and how an attached charter changes the number.
A charter-free valuation values a ship on the assumption that no employment is attached: a willing buyer and a willing seller, prompt delivery, and the hull sold on her own merits. It is the default basis for every value quoted in the sale and purchase market, and it is what a loan agreement means when it refers to market value, because a lender is securing the ship rather than a contract that may not survive enforcement.
A charter-attached valuation prices the ship together with an existing fixture. The number moves in either direction: a long charter fixed above the current market adds value, and one fixed below it subtracts value, in both cases by roughly the present value of the difference over the remaining period.
The Baltic Exchange’s sale and purchase assessments are specified charter free, alongside the other assumptions that make an assessment comparable: a five-year-old benchmark ship, special survey passed, and prompt delivery.
The full article will cover the valuation bases and where each is used, how a charter is priced into or out of a hull value, the treatment of a charter that does not run with the ship, and the place of the basis in the minimum value clause testing machinery.