The bank will consider the security risk on any superyacht. More specifically, with superyacht construction, the bank will also consider the risk of the shipyard going bankrupt. The bank’s concern would be to ensure that its security is protected from third party creditors and that it ranks prior to the yard’s creditors with respect to the superyacht. They will want to know that the owner has clean and full ownership of the superyacht capable of being enforced in the event of default under the loan agreement. Does the superyacht represent the main security granted to the bank to guarantee repayment of the loan? Generally, until a superyacht is almost 80 per cent completed, the value of the construction never corresponds to the actual money already paid into the project. The bank would always require additional security both pre and post-delivery, including personal guarantees by the beneficial owner covering any and all amounts due by the borrower to the bank under the loan agreement. Other security may vary from corporate guarantees, account charges and share charges to assignments of the shipbuilding contract, earnings and insurances and undertakings from the managers that their rights will be subordinated to those of the bank. When the bank is financing a pre-owned superyacht, they will arrange a valuation and inspection survey of the superyacht and will often request an inventory of all items on board the superyacht. Insurance and liability Is the superyacht properly insured during the build process and after delivery? Are benefits under the relevant insurance policies properly assigned to the bank as security? The bank may also request that you cover the cost of any mortgagee’s interest insurance. Covenants The borrower will give many covenants including financial, operational and insurance undertakings, representations or warranties. If you fail to comply with any covenants then the bank can call the loan in.
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