Dream Yacht suspending Guaranteed Charter Income payments

[KC375]

Originally Posted by redneckrob

Several confirming post from real people on the the FP Facebook groups, including a scan of the communication from DYC. So it looks like a real thing.

Thanks that's helpful.
Always dangerous to go too far based on anonymous source with no other activity (see current attempted take down of "Houseparty").
Your corroboration makes this seem more probable. If I hear from DYC I will post an update.

[a64pilot]

There are a lot of statements about how they obviously broke the contract.
What are you basing that on? Have any that are making that statement, read the contract?

[contrail]

So far, there are a few things that we KNOW. The rest is conjecture. We know: 1) Dream Yachts has suspended "guaranteed monthly payments" for six months. 2) When CYC went belly-up, thirty years ago, captains came to the BVI to retrieve boats for banks. 3) After 9/11, the Moorings survived and recovered, stronger than ever. By the way, they DID have guaranteed payments at that time, because my boat was in such a program. 4) After Irma, almost all the BVI charter companies came back and are now at close to their pre-Irma levels. Most have also been having a pretty good year, until now. They have been actively, and for the most part, successfully re-scheduling their charters for a future date.


Human nature is such that many of those with the strongest opinions are either disconnected or remotely connected with the issue in question or have absolutely zero experience with it. The internet only exacerbates this and CF is rife with it. You have only to look at the threads regarding the purchase of ex-charter boats to see that there is a large group who are absolutely opposed to the idea; none of them have direct experience. There is also a smaller group who think buying a used charter boat is a reasonable idea. Most of these are the ones that have actually done it. They have done the deed, but are unable to convince the others that it was a good idea. Such is human nature.



The BVI stopped allowing people to enter almost two weeks ago. We have been on 24 hour Lockdown since Tuesday. Personally, I am self-isolating in the Bight, along with about another 46 boats, some private, but mostly crewed charter boats, like mine. The Lockdown is until Thursday, but most anticipate it being extended, with some adjustments. I have provisioned for six weeks. Starting well before the lockdown, charter companies were starting to do their summer off-season maintenance; in some cases they were already starting to store boats for the off (hurricane) season, as few anticipate much happening before then. Those companies that have "guaranteed" payments will likely have banked the funds for maintenance, insurance, etc, already (we are in the final weeks of the "high season") and the majority of charter companies that do not make guaranteed payments bill their owners for all the operating expenses, anyway. These individual owners, who are on the hook for all expenses, and maybe a mortgage, are the ones I most worry about. The same problem existed after Irma, and I don't know exactly how individuals got through it, but most did. In my experience, most folks who own charter boats are way smarter than they are being credited for in this thread. They ARE aware of the risks involved, and do have ways, maybe painful, of dealing with it. Heck, they keep boats here during hurricane season, but have decided that the benefits of a boat in paradise, under management of a charter company, are worth it. It has been said that no one who knows anything about risk and finance would own a charter boat. When I disagreed, the poster modified his statement to say "no one that he is aware of", which is probably a good tip-off that he isn't very conversant with the industry. I know of several, one of whom owns multiple boats, are friends with some, and have even helped a couple find their boats! Different persons, and persons from different career categories, have different levels of risk they tolerate, and value rewards differently.....as we see from vociferous discussions on when to go cruising, mostly participated in by those who haven't and never will. Owning a boat is never a hugely rational financial decision, and we all know that. It's the same with a charter boat, just a different equation.



Chartering will come back with a bang. It always does. I have re-scheduled my near term bookings and am actively in conversation with several new bookings who are ready to sign as soon as I give them a date. But what about Dream?


They have bases all over the world, and will be operating under many different legal systems and customs. Folks from the US have a habit of projecting their legal experience onto other countries, but that does not always apply! Dream does have a large base in the BVI, where, like everyone but Marine Max, they experienced huge losses in Irma. The BVI operates under UK law, and has bankruptcies and liquidations, etc. etc. as it is a major global offshore banking player. All of this, plus the charter industry, is far more developed than in the days of CSY, and the prospects of sending in a bunch of captains to retrieve a fleet of boats are long gone. Besides, almost all charter boats are now individually owned, and not owned by the the charter companies, so the mortgage holders' beefs will be with the individual owners, as they were post-Irma, and NOT with charter companies. The charter companies' assets vary, but are in the range of any small business, with the exception of Moorings/Sunsail, whose base is worth many millions. It's the largest charter facility in the world, by far. There is lots of belt tightening going on, but no one is running from their obligations (other than the Dream guarantees), yet, and everyone is waiting for things to stabilize.



Everyday, in the news, I see reports where industries or countries are trying some form of "freezing everything in place", where obligations are pushed down the road to the period post COVID. Governments are helping, in order to ease employment issues. Just today, I watched a very detailed program about how the US commercial real estate sector will need such a solution, and will need it in the next few days. Turns out that the banks are willing to do it, as this is a liquidity crisis, not a credit crisis (like what they had in "08), but they need a rule change from the Feds. A solution along these lines is what will be necessary in just about every line of business, in order for the whole economy not to collapse. Why are we surprised that this may be the case with Dream? And, maybe, eventually, the Moorings? Sometimes, it's the bigger picture that yields the best solution, not just the fine print, lawyers and accountants.



Did Dream do this poorly? From what we are told, it certainly sounds that way. But it also sounds like their best strategy. Better to pay the workers to keep the operations going and the slip and insurance payments made, and ask (better than tell!) the boat owners to help out for a few months. Do we know if these other obligations are being met? That would be my question. IF so, and that may be a big if, hanging in there is probably the best option. If NOT, then maybe another solution is in order. But, at least now, you can't move a boat, no worker will likely take on the job, and insurance might well take a dim view of it, too.



On another note, any mechanics liens will be between the boat owners and the maintenance folks, who are usually the charter companies, and I don't see that happening. Most companies use their own staffs, and very rarely call in outside providers. And, the recourse for insurance companies is to cancel insurance (no small problem) but not to seize boats.



I totally understand the OP's concerns and the opinions of others. But, I think an understanding of the industry, at least here in the BVI (it may be totally different under different legal systems, elsewhere), would argue for a conversation with Dream as to maintenance and insurance (ask for the policy), maybe a conversation with a BVI based attorney (there are plenty and I could give the OP a name) and otherwise hanging tight. There might be something to the idea of taking the boat out on some "owner's time", but for the moment, the OP couldn't get here, couldn't move around if he did, and wouldn't be able to sail the boat or leave the Territory. Heck, there are full time cruisers down here trying to find ways to do that! Of course, we don't even know where the boat actually is....



But, I would definitely ask to see the insurance policy and talk to that company.



Best of luck.

[mvweebles]

Contrail- thanks for the lengthy and informative post. My best regards to you as you sit through this.

To be sure, I do not claim any special knowledge of the charter industry. I am Exhibit #1 as a financially irrational boat owner. But I have extensive expertise is in structuring and unwinding joint ventures and complex service agreements (think: large outsourcing and manufacturing agreements). Sometimes they fall apart and it's not pretty. It exposes a different side of human nature, and in that I do have above average knowledge. Simplest metaphor is divorce: occasionally they are amicable, usually they are not. Sometimes they are downright nasty. All I can tell you is that if you have a prized possession, don't leave it home with a scorned or under-funded spouse. Or don't be surprised when you return home and it's gone or mysteriously damaged or encumbered (pawned). At the very least, don't be surprised if it's not properly maintained - probably not top-of-mind with your spouse.

Peter

[DYC]

Dear forum members,

There is much speculation about our current financial position and you can be sure of our survival following the unprecedented pandemic disruption. While I can understand the upset the measures we have had to take have caused, I want you to know it is a step I have not taken lightly. While this step does have short-term implications for our owners, we are looking to meet the long-term obligations for the entirety of this program. This is a postponement of payments, not non-payment. All other ownership benefits, such as owner use privileges have been extended, and we offer the opportunity to extend the program should our owners wish. Quick actions like this will see us all through the disruption.

Quite simply, there are no charter guests at the moment, which means no revenue. All operations have stopped due to travel restrictions and our customers cannot get to our bases to sail your boats. Where our sales team would normally be busy scheduling bookings, they are instead busy rescheduling bookings that cannot take place. This is why this step has been necessary. Many banks that finance these boats are familiar with the hardship the charter industry is facing and are offering options and payment deferrals, compensating for the postponement of revenues.

Although we have delayed the payment of owner revenues, we continue to pay the insurance, the marinas and all the other fees associated with the programme. We still have a staff presence at our bases to look after your boats. We are in this together and the tourism industry has been through difficult times before and we will come out the other side.

Loïc Bonnet
President and Founder, Dream Yacht Charter

[Saleen411]

Originally Posted by DYC

Dear forum members,

There is much speculation about our current financial position and you can be sure of our survival following the unprecedented pandemic disruption. While I can understand the upset the measures we have had to take have caused, I want you to know it is a step I have not taken lightly. While this step does have short-term implications for our owners, we are looking to meet the long-term obligations for the entirety of this program. This is a postponement of payments, not non-payment. All other ownership benefits, such as owner use privileges have been extended, and we offer the opportunity to extend the program should our owners wish. Quick actions like this will see us all through the disruption.

Quite simply, there are no charter guests at the moment, which means no revenue. All operations have stopped due to travel restrictions and our customers cannot get to our bases to sail your boats. Where our sales team would normally be busy scheduling bookings, they are instead busy rescheduling bookings that cannot take place. This is why this step has been necessary. Many banks that finance these boats are familiar with the hardship the charter industry is facing and are offering options and payment deferrals, compensating for the postponement of revenues.

Although we have delayed the payment of owner revenues, we continue to pay the insurance, the marinas and all the other fees associated with the programme. We still have a staff presence at our bases to look after your boats. We are in this together and the tourism industry has been through difficult times before and we will come out the other side.

Loïc Bonnet
President and Founder, Dream Yacht Charter

Well now....straight from the horses mouth, so to speak.

All considering, this doesn't sound totally unreasonable to me.

[Cadence]

Originally Posted by Saleen411

Well now....straight from the horses mouth, so to speak.

All considering, this doesn't sound totally unreasonable to me.

Sounds totally reasonable and proactive. Lets hope everyone comes out on top?

[Chotu]

So basically, like the rest of the world, they are on pause until it blows over.

[sisterblysse]

Originally Posted by svlamorocha

I did not get a word from Moorings, just the usual wire transfer on March 26th..

Ditto from Sunsail for me.

IMHO the speculation on this thread seems to be by multiple posters who either don't understand how guaranteed income schemes work, or maybe not all guaranteed income schemes are created equal.

My contract is clear. I own my boat outright (with the help of a marine mortgage). My payments are to the lender, not to Sunsail.
I lease the boat to Sunsail, on a separate contract, for them to use as part of their fleet, for which they give me a monthly payment and liberal usage rights, and cover all running costs. If they default on their management agreement by ceasing payments to me, that contract is void. However, I still own the boat and am still liable for the mortgage payment and now running costs. Sunsail cannot repo the boat. Only the bank can if I default on mortgage payments.

Apart from Contrail's helpful response, there are too many drama llamas speculating about too many unknowns at this point....

[BlueSkyOne]

Originally Posted by sisterblysse

Ditto from Sunsail for me.

IMHO the speculation on this thread seems to be by multiple posters who either don't understand how guaranteed income schemes work, or maybe not all guaranteed income schemes are created equal

Apart from Contrail's helpful response, there are too many drama llamas speculating about too many unknowns at this point....

Your post seemed to have missed the fact that just a few posts above the owner of DYC (assuming it is actually him) confirmed the suspension of payments, so I don't think posters were drama llamas as you put it. They in fact seem to have speculated fairly well.

Whilst anyone can sympathise with the position of DYC, the fact that it appears sunsail/moorings are still paying out as per contract would somewhat point to clear difference in financial position.

One can only postulate on what DYC would do if one of the owners did not fulfil obligations, but that is speculation.

Its very clear that if you have the financial ability you should recover your asset as soon as possible before real damage is done, given the global spread of DYC it is likely that if/when things start to return to normal its possible that they will restart payments at a reduced rate given by that time the European season will likely be finished and quite possible that a chunk of the Caribbean season will have been lost. Therefore they will likely have to spread any income diluted - at this point they will realise if you have accepted 6 months or more of no income you will probably accept a further 6 months at a reduced level as it will be too late to take back the boat. At which point the boat is a year older.

One thing is for sure they can no longer call it guarantee income program, that would open up all sorts of liability from this point onwards, perhaps a fact that sunsail have a better appreciation or forward looking view.

[redneckrob]

Originally Posted by sisterblysse

Ditto from Sunsail for me.

IMHO the speculation on this thread seems to be by multiple posters who either don't understand how guaranteed income schemes work, or maybe not all guaranteed income schemes are created equal.

My contract is clear. I own my boat outright (with the help of a marine mortgage). My payments are to the lender, not to Sunsail.
I lease the boat to Sunsail, on a separate contract, for them to use as part of their fleet, for which they give me a monthly payment and liberal usage rights, and cover all running costs. If they default on their management agreement by ceasing payments to me, that contract is void. However, I still own the boat and am still liable for the mortgage payment and now running costs. Sunsail cannot repo the boat. Only the bank can if I default on mortgage payments.

Apart from Contrail's helpful response, there are too many drama llamas speculating about too many unknowns at this point....

Some of your so-called "drama llamas" have been involved in bankruptcy proceedings when it took several years for assets that the company didn't technically own and "could not" repo to be sorted out and returned to their rightful owners. They may be talking from experience with insolvency, curious what your experience as an asset holder in such a situation has been to the contrary?

It's important to read carefully, nuance counts here. No one is claiming DYC will or can repo any boats. No one is claiming that they have any legal right to an owners boat. Or that owners should sue, or stop making payments, or....the list of pushback on things not ever suggested on this thread is interesting if nothing else.

What we are saying is that it's highly likely creditors would claim those assets in a bankruptcy proceeding, regardless of if they "cannot" according to the contract. And it has to be sorted out through the bankruptcy process which requires the owner of the asset to hire legal representation to ensure they are represented, something that can be expensive and take a long time. Everything gets frozen in bankruptcy or insolvency no matter the legal system, and it takes time and money to sort it out. Anyone who has experienced this firsthand is acutely aware of that fact.

If there's anything you can do to avoid that eventuality given that the company holding your asset confirms they're in significant financial distress, you'd be foolish not to. It's baffling you would choose to criticize those who provide very detailed and well reasond advice as "drama llamas" for pointing that out. In addition to sounding like a lecture to second graders, it's what we call an ad hominem attack. That's where you attack the person because you don't like what they're saying but can't actually articulate what's wrong with what they're saying. I'm apparently one of your "drama llamas". If you would be so kind as to quote anything I said and tell me what is specifically incorrect about it I'd love to see it and would treat it as a learning experience. But please don't sit around calling me names while criticizing things no one actually said. Thanks!

[bstreep]

Not to add to the panic. Well, maybe. As Rob said above, a "grab" in a crisis is not unusual. A friend of mine had a classic car in consignment at a dealer that subsequently folded up the tent. His car, along with all of the others were seized. It didn't matter that the title was still in his name. Still seized. It took many months and $$ to get his car back. Again, this is a boat, not a car. And in a different country, I'd presume.



P.S. The base manager in French Polynesia assured me that Loïc Bonnet is a ruthless businessman. My dealings with DYC in our charter would have ME looking at options. And remember (as was pointed out to me), ANY legal dispute takes place in Mauritius.

[mvweebles]

Originally Posted by DYC

Dear forum members,

There is much speculation about our current financial position and you can be sure of our survival following the unprecedented pandemic disruption. While I can understand the upset the measures we have had to take have caused, I want you to know it is a step I have not taken lightly. While this step does have short-term implications for our owners, we are looking to meet the long-term obligations for the entirety of this program. This is a postponement of payments, not non-payment. All other ownership benefits, such as owner use privileges have been extended, and we offer the opportunity to extend the program should our owners wish. Quick actions like this will see us all through the disruption.

Quite simply, there are no charter guests at the moment, which means no revenue. All operations have stopped due to travel restrictions and our customers cannot get to our bases to sail your boats. Where our sales team would normally be busy scheduling bookings, they are instead busy rescheduling bookings that cannot take place. This is why this step has been necessary. Many banks that finance these boats are familiar with the hardship the charter industry is facing and are offering options and payment deferrals, compensating for the postponement of revenues.

Although we have delayed the payment of owner revenues, we continue to pay the insurance, the marinas and all the other fees associated with the programme. We still have a staff presence at our bases to look after your boats. We are in this together and the tourism industry has been through difficult times before and we will come out the other side.

Loïc Bonnet
President and Founder, Dream Yacht Charter

These are comforting words. If they are followed with communication about the situation, tangible and verifiable assurances DYC are meeting all other obligations, transparency in the finances and plans, forthright efforts to represent each owners' interests when dealing with lending institutions with whom DYC likely has better relationships with, and a general sense of shared sacrifice, I might stick it out. Though I think I'd still have ask: how does this company remain viable when their value proposition relies on the promise of guaranteed income, especially if their competitors are not forced into similar suspension of payments?

I'm short, good start with words. If I were an owner, I'd been keen to ensure words are followed up with actions.

Best success to both DYC and their owners.

Peter

[mvweebles]

Originally Posted by User0331

Ditto from Sunsail for me.

IMHO the speculation on this thread seems to be by multiple posters who either don't understand how guaranteed income schemes work, or maybe not all guaranteed income schemes are created equal.

My contract is clear. I own my boat outright (with the help of a marine mortgage). My payments are to the lender, not to Sunsail.
I lease the boat to Sunsail, on a separate contract, for them to use as part of their fleet, for which they give me a monthly payment and liberal usage rights, and cover all running costs. If they default on their management agreement by ceasing payments to me, that contract is void. However, I still own the boat and am still liable for the mortgage payment and now running costs. Sunsail cannot repo the boat. Only the bank can if I default on mortgage payments.

Apart from Contrail's helpful response, there are too many drama llamas speculating about too many unknowns at this point....

You're agreement with Sunsail creates what is termed in the US a Bailment with specific rights and obligations to both parties. In the US, once a mutual Bailment is established (each party receives benefit, which describes this relationship), the Bailee (Sunsail in this example) has rights and interests that supercede the Bailor (owner). Obviously, this varies widely by jurisdiction. But there are very likely nuances that are interpreted in case law within the jurisdiction versus direct clauses within an agreement.

If the venue is Mauritius, well, you would need an attorney knowledgeable in their contract law to advise you of whether a Bailment exists in law. And if so, the rights and responsibilities of each party.

Just a hunch, but the post who spoke of a friend's collector car that was ensnared in a sweep of show cars that took time/money to extricate likely received an expensive lesson in Bailments.

So an owner can hope for the best with DYC and maybe all goes well. If it doesn't go well, it may be more difficult than you can imagine to unwind, especially in a foreign country. Contract law can be pretty complex.

As mentioned, good luck to both DIY and the owners.

Peter
Llama.

[IAmGroot]

Catamaran Company has put their position out there now: https://www.catamarans.com/We-Go-The...o+The+Distance

Critical bit of the post for this thread:

We will continue to protect our owners whose boats we manage and sell. We will continue to keep all funds for charter and sales in the same escrow accounts despite no legal or financial requirements to do so, just as we have done for over 20 years. We will continue to promise that we will never comingle your funds with our funds and we will provide the operating funds for our business. Just like all the other crisis’s in the past, no owner payments will be missed and all contracts will be honored. We have sufficient cash resources and lines of credit to last more than 6 months under the current total-lock-down scenario but obviously hope that we will be released from ‘captivity’ sooner rather than later but either way, we will continue to adhere to the local laws where we operate.

Looks look like they built-up a cash reserve just for these situation. The balance of their post explains this a bit. Good work CatCo.