petem
Well-Known Member
And Fletcher (albeit a different scale to how Fairline are/were).
Fairline - any news?
- Thread starter DougH
- Start date
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Deleted User YDKXO
Guest
I'm glad you said that because I think it needs saying. Only a few months ago there was a similar 'truth about Fairline' feature in MBY which was effectively a powder puff advertorial. In fairness to the employees of Fairline, the dealers and those customers who have placed orders and those customers who are thinking about placing orders, any feature on WB's takeover of Fairline should make more than a cursory attempt to investigate WB's intentions
To that end maybe the story ought to be written by a financial journalist, rather than a boating journalist, equipped to trawl through both Fairline's and WB's accounts and ask a simple question - if the idea is to revive Fairline's fortunes, then where's the money?
petem
Well-Known Member
Mike, I think that's a good call. Despite my 'glass half full' attitutude to this matter, even I want to get to get to the truth.
In the mean time, I don't think any of us should write off what could still be a viable business, equally I don't want anyone to lose a deposit should the company cease trading.
MapisM
Well-Known Member
I wholeheartedly agree that the "story" (assuming there is one to start with, which I doubt) takes much more than boating passion to be described, but I'm not sure your question is the right one.
Not that money ain't relevant of course, but that's something financial investors can usually find, if/when they want to.
I'd rather ask them, IF - and it's a big if - the idea is to revive FL fortunes, then HOW?
With these folks, what's often conspicuous by its absence is rather a brilliant industrial strategy than money... :ambivalence:
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Deleted User YDKXO
Guest
Well yes but if you look at WB's accounts and those of its various companies, it is difficult to see any cash. You can have all the brilliant industrial strategies you like but if you haven't got the cash to see them through, they're worthless. Unless of course Mr Ahmed is going to be the Roman Abramovich of the motorboating world and fund Fairline through his personal wealth?
MapisM
Well-Known Member
I'm not familiar with WB accounts, but I've seen LBOs where the buyers' money was just a tiny fraction of the transaction value, and the rest was supplied by banks - supported by collaterals of course, kindly offered by the target company itself. Which, in a sense, is therefore financing its own acquisition (mind, in spite of the fact that this financial assistance is in theory illegal in most civilized Countries).
In other words, let's assume that the brilliant idea for resurrecting FL would be the purchase of Azimut-Benetti group, and that Vitelli would be silly enough to consider such proposal from WB.
What WB would do is go to RBS or whatever, proudly offering them to organize and finance the transaction (with the Azimut-Benetti assets as collaterals), hence without putting a lot of their own fresh money in it.
I'm not saying it's easy peasy, and these days RBS & C. would surely be a bit more careful than in the past, but you see what I mean...
In other words, let's assume that the brilliant idea for resurrecting FL would be the purchase of Azimut-Benetti group, and that Vitelli would be silly enough to consider such proposal from WB.
What WB would do is go to RBS or whatever, proudly offering them to organize and finance the transaction (with the Azimut-Benetti assets as collaterals), hence without putting a lot of their own fresh money in it.
I'm not saying it's easy peasy, and these days RBS & C. would surely be a bit more careful than in the past, but you see what I mean...
jfm
Well-Known Member
Mr Vitelli could of course go to the very same banks and have A-B borrow the very same money secured on the assets and pay himself a big dividend* but remain the controlling shareholder. I'm curious about whether that would be ok in your view. I mean, does there have to be a leveraged acquisition for something to be bad (so to speak - I realise you didn't use that word) or is leverage/debt intrinsically bad?I'm not familiar with WB accounts, but I've seen LBOs where the buyers' money was just a tiny fraction of the transaction value, and the rest was supplied by banks - supported by collaterals of course, kindly offered by the target company itself. Which, in a sense, is therefore financing its own acquisition (mind, in spite of the fact that this financial assistance is in theory illegal in most civilized Countries).
In other words, let's assume that the brilliant idea for resurrecting FL would be the purchase of Azimut-Benetti group, and that Vitelli would be silly enough to consider such proposal from WB.
What WB would do is go to RBS or whatever, proudly offering them to organize and finance the transaction (with the Azimut-Benetti assets as collaterals), hence without putting a lot of their own fresh money in it.
I'm not saying it's easy peasy, and these days RBS & C. would surely be a bit more careful than in the past, but you see what I mean...
(*Used in the modern sense of the word; it need not technically be structured as a dividend. Let's not worry about micro-details)
MapisM
Well-Known Member
Wow.
THIS is the sort of news that no magazine, regardless of how hard they might try, will never get from WB!
I'm sure you'll never confirm this, but why do I have the funny feeling that you are advising WB to explore that route with Mr.V, with the side bonus of taking over also FL in the process?
Mind, I for one would be delighted to hear of such outcome for FL, and I can't think of a better alternative, for anyone involved.
Btw, that would open an almost limitless growth path within the new group, for anyone wishing to go bigger than 78'....
Having said that, my short answer to your question is no, it wouldn't be ok, I'm afraid.
First of all, if strictly meant as a modern form of ATM withdrawal, it would be so obviously a tax avoidance transaction that even the dullest officers could understand that.
And even assuming that it would be structured in a formally bullet proof way (like pretending it's aimed at an acquisition...
), it would still be unethical to say the least - not that this matters a lot, I suppose.Secondly, but more important from a substantial viewpoint, what normally happens with the transaction you envisaged is that Mr.V would not "remain the controlling shareholder" anymore, in practice.
I mean, yes, of course he could from a formal viewpoint, but in the reality of any highly leveraged companies, the true controlling shareholders are the banks.
And the funny thing is, when the shareholders are just money merchants (ops, sorry, financial investors
), they couldn't care less, because even before finalizing the acquisition, all they are interested in is a solid exit strategy.I never met Mr.V (otoh, I do know Mr.F - more about him later), but I don't think he's the kind of person who would easily accept to be strangled by strict covenants or submit a waiver request (and wait its approval) for any slightly extraordinary business transaction...
In fact, if you should eventually come to the point of discussing with him the A-B-FL deal, my 2c is to make it clear from the start all sort of restrictions he would be subject to, rather than just try to sell him the fancy idea of a big tax-exempt "dividend". In fact, sooner or later, his lawyers would understand the ins and outs of these transactions, and I guess you don't want to invest a lot of time just to see him walking away upset at the last minute (been there, seen that).
Re. bad or good, even if I concede that you noticed I didn't use such wording, well, as someone in Rome much closer to God than myself sometimes says, who am I to judge?
There's one thing we can tell for sure though, because this is now history: afaik, so far Mr.V never bit the bait of acrobatic finance, while Mr.F did in spades.
Chapeaux to both for the growth they've been able to achieve, but we all know who's the one that had no other choice than begging for a rescue from China, eventually... :ambivalence:
dom
Well-Known Member
Interesting thread. I know little about mobos, but something about investing and as luck would have it one of the youngsters here has recently been running his slide rule over a couple of these businesses. Different stokes for different strokes and all that, but:
- The EBIT/EV yield seems pretty hopeless - something like 600-900 basis points would be nice, but that's a pipe-dream. Remember one can purchase a basically unleveraged UK house builder delivering 800bps on an unlevered basis, or one can purchase Unilever which is locked to global GDP outcomes and provides a 3%+ yield on top. Yet many of the boaty businesses are delivering minus EBIT, which translates into value destruction for shareholders.
- Levereage - what a mess! All sorts of covenants, charges, side-letters and some of the valuations on tangible assets are a sight to behold. Moreover the banks seem unsettled: arrive to take a look at the underlying business and the banks are terrified of being forced into a high-risk financing structure; yet take a look at one of these business's crown jewel assets and the banks appear keen to "encourage" a sale.
- The Brand - brands are much better if they can dip out of the super-wealth layer and into the aspirational segment: I'm thinking Swisss watches, or perhaps LVMH's champagne range that goes from Moet/Veuve Clicquot on the party side to Dom Perignon/Krug at the higher level. Boat brands can't do this. Then there are no free "oohs and ahhs" as old boats are sold, as opposed to one-off Versace or Ferraris. Old secondhand boats are well ...just old!
- Growth Potential - many of these builders keep talking about these straightened new times. I fail to get this: we are living in an era of vast wealth disparities, rising Gini coefficients and an emerging market wealthy which wants to display its money for all to see. Something is wrong if a boatbuilder can't grasp that opportunity in the same way Rolls-Royce has nailed the motor car equivalent
- Where's the plan Stan? Speak to some of these builders and there's no sign (at least not that I can understand) of how to deal with, let alone grow, in the world they're in.
- China - whenever someone mentions China to me as a possible out, I can't help thinking ponzi. Why, because the Chinese market has taken a bit of a pasting over the summer and Chinese investors have become distinctly more cautious. And if I don't know who the fool at the table is anymore, well it's probably....
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petem
Well-Known Member
I think you're painting rather a rosy picture. Just kidding - good post and I suspect you're spot on. Fifteen years ago, you could buy an S24 for £35k or a Targa 30 for £100k. They were aspirational boats. Nowadays the cheapest UK built boat is creeping towards the £400k mark fully spec'd. Way beyond most people's aspiration.
MapisM
Well-Known Member
Oi, can't agree with that.
Old boats might well be worth no money, but real worthiness is something else than just cash, imho. Old boats are what you can do and actually do with them.
To me, my old tub is a floating home and an opportunity to have a great time with good friends, enjoying the sea to the fullest.
And I've yet to come across any investment that, in itself, can deliver that - no matter how high its yield.
Other than that (and actually, I understand your point also re. secondhand market...), your summary is a textbook performance, thanks for a crystal clear sanity check.
Btw, your point 2 perfectly describes what I tried to explain in my previous post re. leverage/debt being "intrinsically bad", as jfm put it.
CLB
Well-Known Member
I assume you mean from the big 3 (or is it 2 now?) There are plenty of UK built boats for aspirational money if you look at the smaller UK builders.
Hugin
Well-Known Member
If you look at the remaining 3 big British mobo builders then they have basically all abandoned the below 40ft market and are chasing profits from much bigger boats. So I do think they are trying to adapt to the rising Gini..... problem is there are so many chasing relatively few very wealthy buyers. Look at the Italians...... lot's of small builders hoping to sell a few large boats. Even the French volume builders are chasing the very wealthy with bigger and bigger Prestige and Monte Carlo models (one model now above 100ft). And they soon end up in the territory where bespoke builders used to have it all. So more mouths to feed from the same few prospective buyers.
Another problem - or maybe the proper terminology is "imminent danger" - of going big and catering only to the very wealthy is that at some point a correction is inevitable. Looking at the macro-economic numbers the global economy is hopelessly and dangerously over-capitalized. The productive economy simply can't support all this capital..... so history tells us that in the long run this capital will simply have to be destroyed. One way or the other. When - not if - that begins to happen we will see the majority of "big boat" builders collapse and the rest fighting for survival. Why? Because when the Gini starts moving the other direction, the market for big boats will be able to feed off the pool of used boats for a very long time. The depreciation curve for a big mobo is already a killer the first 5-6 years..... a class of wealthy people who still have money but no longer (in general) see their fortunes grow at the same rate (if at all) will choose to avoid that initial depreciation shock..... not least because there will be plenty of big, slightly used but perfectly up to date boats available which have already depreciated to much less than half the initial value.
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ari
Well-Known Member
Oi, can't agree with that.
Old boats might well be worth no money, but real worthiness is something else than just cash, imho. Old boats are what you can do and actually do with them.
To me, my old tub is a floating home and an opportunity to have a great time with good friends, enjoying the sea to the fullest.
And I've yet to come across any investment that, in itself, can deliver that - no matter how high its yield.
Other than that (and actually, I understand your point also re. secondhand market...), your summary is a textbook performance, thanks for a crystal clear sanity check.
Btw, your point 2 perfectly describes what I tried to explain in my previous post re. leverage/debt being "intrinsically bad", as jfm put it.
You're absolutely right, but I think the point was that there is no 'classic' market like there is for cars. People don't covet old boats like they covet old cars - look at the Ferrari F355, mid nineties yet selling for over £100,000 now. Where is the marine F355? Old production boats aren't classics no matter how good they are, they're just old.
petem
Well-Known Member
Agreed. But perhaps we'll look back in 10 years time and be kicking ourselves that we didn't buy this http://www.yachtworld.co.uk/boats/1966/Riva-Aquarama-2539951/Netherlands.
Murphys_Law
Member
On a similar vein re. Classic values. 1969 Aston db6 volante £3,500 new, today 500-800k dependant on condition etc. 1969 Fairey Huntsman 31 new £11,000 now £30-60k on condition. And that is a boat that could be considered a classic!
paultallett
Well-Known Member
dom
Well-Known Member
Ok retracted! ...come to think of it my boat is also over ten years old now
But seriously (and apologies for joining a mobo thread and immediately drifting), I think the points you make about leverage and Hugin makes about depreciation are sufficiently important as to pose a systemic risk to the boat building industry amongst others:
Over the past few years we have seen aggressive unconventional monetary policy (central bank forward guidance and QE) force yields down, and consequently bond prices up. If I had say invested €1m in a 10Yr German Bund back in 2005 I'd be sitting on €50K of interest per annum income, and if I had owned a 30Yr Bund I'd have a juicy €400K capital gain as well. I might go to the boatshow to spend it; but i might also be in for a rude awakening:
- If I roll my maturing euro €1m bund into a new 10Yr one, I will see my income drop from €50,000 to just €5,900 per annum (current yield is just 0.59%). This may be my first glimpse of the deflationary sting in the tail from BoE QE.
- Yet to come are the side effects of the massive inter-generational transfer of wealth from the young to the old, and not to forget the unprecedented transfer of wealth from the proletariat (those who earn a living from their labour if that's still a term) to the holders of capital assets.
- However with my investment instincts aroused I may very well pay lip-service to such ephemeral risks. I want a return and I won't give a hoot about the warnings from the likes you and jfm. I may even fancy my chances lending to ....erm LBOs! Now for the time being, even the sloppy ones are looking OK; even better I can look forward to a quick profit on my loans (falling yield and compressing credit spreads), so I'm laughing.
- And I'll keep laughing until I realise that my money is tied up in a zombie company which can only survive if I, alongside the other bond investors, conspire to keep mispricing the risks of lending to these companies. Eventually, I'll panic and the usual melee will ensue.
- At that point my wife may very well say, "nice one dom you cretin", but the money will be gone!
- This is where Hugin's argument comes in. For unlike the aircraft industry where airliners are priced pretty rationally (fuel burn compared to new planes, position on maintenance schedule, flight hours, etc) boats are different. As he says the first 5 yrs depreciation is scary for those (like me now) without large income and capital cushions; it also bears no relationship to a rational depreciation curve, let alone a price which factors in some sort of happiness-coefficient. In this new era of frugality I will quickly forget about a new boat and so will many many others.
Ok, sorry for the diversion ...I'll go back beneath my stone now
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rbcoomer
Well-Known Member
I think many old production boats are still quite sought after and thus could be deemed 'classics' to a degree. The big difference to say classic cars is the ongoing maintenance is disproportionate to the value. Unlike a classic car that can be garaged and used on the odd amenable day, dragging an ageing 50' boat out of dry storage and dropping in the water for the day isn't really practical! (Nor is expecting everything to work...
)With smaller vessels, there's a fairly active market (albeit quite 'budget' in many respects) because it taps into that 'aspirational' theme. I think size matters quite a bit here as once neglected, the costs of recommissioning can be way in excess of any residual value - a few grand to recommission can be realisation of a dream, but once you get to many tens of thousands a new boat gets much more appealing. There seems a lot of bigger stuff sitting in marinas as holiday homes that never seem to move - often semi-abandoned pending the owners final realisation that it's only worth a fraction of what it owes. I'm guessing that the ethos is the longer they keep them, the more years the loss is spread over and thereby the more acceptable the depreciation? There's perhaps something to be said for that - certainly here in the UK where taking a number of holidays aboard over the year can make the marina fees quite good value when compared to holiday accommodation costs...
Fascinating thread and given the silence from Fletcher too, does make you wonder what's going on behind the scenes.
vas
Well-Known Member
dom!
nice to have you here, hope you stick around to contribute to such threads
cheers
V.
PS. sorry gave up with the Greece thread on the lounge...
nice to have you here, hope you stick around to contribute to such threads
cheers
V.
PS. sorry gave up with the Greece thread on the lounge...