Skip to main content

Maritime Administration: Weaknesses Identified in Management of the Title XI Loan Guarantee Program

GAO-03-728T Published: May 15, 2003. Publicly Released: May 15, 2003.
Jump To:
Skip to Highlights

Highlights

Title XI of the Merchant Marine Act of 1936, as amended, is intended to help promote growth and modernization of the U.S. merchant marine and U.S. shipyards by enabling owners of eligible vessels and shipyards to obtain financing at attractive terms. The program has guaranteed more than $5.6 billion in ship construction and shipyard modernization costs since 1993, but has experienced several large-scale defaults over the past few years. One borrower, American Classic Voyages, defaulted on five loan guarantees in amounts totaling $330 million, the largest of which was for the construction of Project America cruise ships. Because of concerns about the scale of recent defaults, GAO was asked to (1) determine whether MARAD complied with key program requirements, (2) describe how MARAD's practices for managing financial risk compare to those of selected private-sector maritime lenders, and (3) assess MARAD's implementation of credit reform. We are currently considering a number of recommendations to reform the Title XI program. Because of the fundamental flaws we have identified, we question whether MARAD should approve new loan guarantees without first addressing these program weaknesses.

Full Report

Office of Public Affairs

Topics

Construction costsFinancial managementLoan defaultsLoansMerchant marineShipyardsLoan guaranteesBreach of contractPrivate sectorFinancial statements