£5.9 Million Yacht Finance for International Entrepreneur with €1 Million AUM

• Client: International entrepreneur with a substantial global investment portfolio
• Asset: Sunseeker 115 Sport Yacht with a total transaction value of approximately £6.6 million including the existing boat trade-in
• Challenge: Required specialist finance for a commercially registered yacht with a proposed seven-year balloon structure
• Finance: Yacht finance with €1 million of assets under management required by the lender

Luxury asset finance can involve very different considerations from conventional property lending, particularly when the asset is a high-value yacht intended for commercial use. Enness was approached by an international entrepreneur looking to arrange finance for a Sunseeker 115 Sport Yacht.

The client was a successful entrepreneur with extensive global investments and business interests. The yacht was to be owned by an established French company with a French VAT number, registered commercially under the French flag and used for charter activity.

A purchase price of £5.9 million had been agreed, alongside a trade-in of the client’s existing boat valued at approximately £700,000, bringing the overall transaction value to around £6.6 million before tax.

The original financing requirement was to structure the borrowing over seven years with a significant balance remaining at the end of the term. The client expected the yacht to be worth approximately £3 million after seven years and therefore wanted a financing structure that reflected the anticipated residual value.

However, yacht finance can be particularly sensitive to the way a lender assesses the future value of the asset. Unlike property, yachts can depreciate relatively quickly, with changing technology and specifications affecting resale values. This can make lenders cautious about structures that leave a large balance outstanding at maturity.

The lender initially considered for the transaction was not prepared to offer the proposed balloon structure and instead required the borrowing to be amortised over a maximum seven-year period.

The lender was, however, able to offer an alternative structure. Rather than requiring the original deposit arrangement, the bank was prepared to fund the £5.9 million purchase price following the trade-in, subject to a minimum of €1 million being placed under management with the bank.

This provided an alternative to committing a substantial cash deposit while also establishing a wider private banking relationship. The structure allowed the lender to consider the client’s broader financial position alongside the yacht itself.

The case demonstrates how superyacht finance can involve considerably more than simply financing the purchase price of the asset. Ownership structure, intended use, registration, depreciation and the borrower’s wider financial position can all influence the available options.

For international entrepreneurs and high-net-worth clients purchasing luxury assets, luxury asset finance can provide access to specialist lending structures that take account of both the asset and the client’s wider financial position.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, asset suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances. Assets placed under management can fall in value and returns are not guaranteed.

Risk Warning:
Assets used as security may be repossessed if repayments are not maintained. Luxury assets such as yachts can fall significantly in value and may be affected by depreciation, market conditions, maintenance costs and changes in demand. Where assets or borrowing are denominated in different currencies, exchange-rate movements may also affect their value or the cost of borrowing.