POINTS TO CONSIDER • The bank would usually have the right to inspect, at any time, the construction process to verify whether the value of the superyacht has diminished as this would impact on the security value represented by the superyacht • The borrower will need the bank’s prior consent before being able to agree to any amendment or variation to the shipbuilding contract • Is the flag jurisdiction acceptable to the lender? Is the superyacht MCA compliant? Is the Classification Society reliable? As the English High Court decided recently, not all MCA Large Superyacht Code certification is identical and reliable. The banks need to be aware of that. Is the superyacht compliant with the statutory requirements of the flag state? • Is the Classification Society acceptable? The banks will be sensitive to the reputation of the same Classification Society in different countries. Country ‘A’ may be ok. Country ‘B’ may be questionable POST-DRAWDOWN • The bank would usually have the right to conduct a maintenance check and inspect the superyacht upon reasonable request to check that the condition of the superyacht does not materially diminish during the lifetime of the loan • The borrower should not make any alterations to the superyacht without the bank’s prior consent • The borrower shall operate the superyacht only in the territorial limits of the insurance cover • The borrower will need the bank’s prior consent before agreeing to sell the superyacht and the bank will require that the whole loan is repaid in full upon a sale • The bank may place restrictions on the length of any charter of the superyacht The bank’s powers are generally wide reaching where there is a borrower’s default and the bank can usually enforce any of the security in any order.
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