YACHT FINANCE IN MALTA
Over the last ten years a number of international banks have entertained a policy of financing the acquisition of yachts (asset finance) to facilitate their clients. These banks were motivated by the ever-growing demand by high net worth clients, and indeed some also set-up specialised departments to deal with the mounting requests believing that yacht finance was a means to attract even more high net worth clients to their services. These banks can be said to have spurred a true yacht finance business. A number of other banks, viewed yacht finance as a risky business, and would not venture into this new market. They limited themselves to financing the acquisition of a yacht by an esteemed client, simply to avoid the client from requesting funds from another bank, thereby commencing a new banking relationship with a competitor. Nonetheless, they still provided finance to yacht owners.
The yacht finance market is a true niche market accessible only by high net worth clients not needing finance to acquire the yacht they have set their eyes upon, but usually looking for a facility primarily for cash flow purposes (or possibly looking for gap finance for a limited period of time).
Any person seeking yacht finance must approach this finance market with a different frame of mind to that he is used to when dealing finance requirements for his business. He must realize that financing the acquisition of a yacht is a risky business for any bank and credit policies are very tight. Furthermore, the banks view yachts as private assets of their clients, not as a business, so any person seeking to finance an acquisition, or a refit, must be aware that the bank will not be impressed by any business (charter) plan, even if intended only to support, and not to replace, a repayment program provided by the owner.
Terms of Lending
Typically the terms of lending by banks looking to finance a yacht are:
- a loan of up to 60% or 70% of the value of the yacht
- a term of 5-7 years
- monthly or quarterly repayments
- a fixed interest rate, or a fixed margin over and above EuroLibor
- a first ranking mortgage of the yacht and a pledge over the insurance policies
- a personal guarantee by the beneficial owner
Other more structured solutions are also used depending on the circumstances of the client and his creditworthiness, the yacht he wishes to acquire, the bank's policies and the business climate when an application for yacht finance is filed.
Finance leasing solutions are also common and are pre-dominantly provided by Italian and French banks. Such a solution entails the finance of 100% value of the yacht. During the period of the lease the Bank retains ownership of the yacht and little or no other guarantees are requested. However, the use of such a method of finance will greatly depend on the client's creditworthiness and bank's policies.
The Present Yacht Finance Market
Until 2008 the yachting industry experienced a surge of banks entering the race to secure an ever-increasing number of clients seeking yacht finance. Until then obtaining yacht finance appeared to be easy. The global recession experienced in the recent years demolished the yacht finance industry so that in 2009 we can safely state that very few, if any, high net worth individuals were able to secure any asset finance to purchase their new yacht. The banks remaining in the market increasingly sought, and still seek, to obtain from clients other forms of collateral and security, including immovable property, cash collateral, and pledges over portfolios. Some banks also suggest that clients should transfer their portfolio, or part, to the bank's private wealth departments in support of their application. Moreover, lending has become more regional and banks nowadays prefer closing deals with clients, and assets, based close to home.
DF Marine is regularly in contact with a number of renowned banks and is able to report that a number of banks are still interested in yacht finance. These banks advise us that there are opportunities for high net worth clients to finance the purchase of their yacht, and are willing to entertain applications. Please contact us for further information and to learn which banks are still interested in yacht finance, and on which terms finance can be secured.
