Out now: Clyde & Co podcast series 2.5
John Leonida sits down with Sam Cook, Head of JP Morgan's Specialist Lending Solutions, to discuss the how and the why of superyacht finance…
Clyde & Co has a leading yacht and superyacht team with over 20 years of experience. The second series of the Clyde & Co podcast seeks to demystify the process of buying a superyacht. Yacht brokers, family office advisers and bankers, as well as senior Clyde & Co lawyers, join superyacht industry commentator John Leonida to discuss every aspect of buying a superyacht. In episode five, John Leonida sits down with the head of JP Morgan's Specialist Lending Solutions, Sam Cook to discuss the how and the why of superyacht finance.
Before anyone can begin dreaming about motor yachting in the Caribbean or the Norwegian Fjords, Cook frames his thoughts with the maxim that “The bank is not just a lender but a partner” to its clients in their superyacht journey, whether they are clients who are asset rich yet have their cash tied up or clients that just want the flexibility of investing their capital in other markets.
JP Morgan is a bank that wants to add value and support the very detailed and time-consuming process of buying, building and of course financing a superyacht. The partnership between the client and the bank means looking out for the client's best interests. The bank has as much interest as the client in making sure the subject superyacht ticks all the right boxes.
Cook explains that surveys, evaluations and conversations about how the superyacht is managed are part of the requirements of a financed superyacht, which is not too onerous because it is what a prudent owner would do anyway.
Superyacht financing is part of a far-reaching relationship with the client and as Cook puts it; “The bank's interest is aligned with the interest of the yacht owner” and they aim to “preserve the yacht as an asset from the bank's perspective”.
It is important not to forget that any superyacht finance is based on the same principles as commercial ship financing which have its own set of rules and customs which are alien to anyone who has not financed a ship or a superyacht.
In a business that is often fast moving, John asks how the bank deals with clients who have fast deadlines, for example, a client wanting to buy a yacht in four weeks when the financing process, from credit committee approval, and term sheet to eventual drawdown is estimated to take two to three months. Cook explains that the bank can get creative, for example by utilising existing assets held with the bank” and then refinance the yacht when the loan has gone through.
Proof, that the relationships the bank has with its clients can make things happen, in other words, it is helpful when clients have a prior history with JP Morgan. Not only does it help with achieving what the client wants but it helps establish the responsibility if things go wrong. In that, the most aggressive of steps is re-possession which can happen due to a myriad of reasons and not just a payment default. For example, an accident that leads to the need for a significant repair or that might lead to the yacht needing to be scrapped.
“In the worst case scenario, we need to ensure the value is protected and there are normally appropriate measures in place” and those measures, says Cook, would be brought into play in partnership with their client. The preference is an amicable resolution.
Obtaining a loan for a superyacht is a lengthy process that requires analytical and collaborative minds that put the client’s interests first. Sam shares his experience and gives listeners of this intriguing and informative podcast, an insight as to how the business of borrowing money for a superyacht works. We hope you enjoy listening.
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