Superyacht Finance in 2012 – postcard from the Monaco Yacht Show


I spent a few days in Monaco this week visiting the fascinating Monaco Yacht Show (it is a tough job but somebody has to do it) as well as Marine Money’s Super Yacht Finance Conference. As well as meeting a number of business jet and helicopter people it was interesting seeing how a similar high value luxury asset class is faring.

As you would expect, the super yacht market is struggling. Like the business jet market it was severely overheated from 2005 to 2008 and the barriers to entry for a ship yard are a lot less than for an aircraft manufacturer. Many of these yards have now closed. Like business jets, a lot of pre-owned yachts are for sale. One attendee said that there were a lot of owners at the show but he was not sure if they were there to buy new vessels or simply check on how the sale of their existing yacht was going.

There was a lot of talk about opportunities in China, but, perhaps surprisingly, the development of the Chinese super yacht market is well behind the business jet market. Although China has a larger coastline than the US, there are very few marinas and no yacht register. In 2011 China was a key market for aircraft manufacturers but the super yacht industry has not yet benefitted from the growth in ultra-high net worth individuals.

Compared to business aircraft, super yachts are extremely difficult to value. No two yachts are identical and it is a much less liquid market. A popular joke is that you should start selling your super yacht on the day you take delivery. Very few banks are lending into the market and the ones that are – not surprisingly – focus on the borrower’s credit rather than the asset. Loan-to-values tend to be between 50% and 60%. Any business jet banks that are interested in super yacht finance would be very much welcomed into the market by yacht builders and brokers.

Super yacht salespeople do have one advantage though. One aircraft manufacturer once said that the only way to judge a potential buyer at an airshow is by looking at their watch, their shoes and their belt. To board a super yacht you have to take off your shoes. If a prospect’s toes are peeking out through holes in their socks it is not a good sign.