Dream Yacht suspending Guaranteed Charter Income payments

[letsgetsailing3]

Originally Posted by CarlF

If the OP only loses 6 months of "guaranteed" charter income - he should feel lucky - chalk it up to "lessons learned". If Dream Yachts goes out of business, he will just be an unsecured creditor at the end of a very long line. Many of those creditors (like banks) will be "senior" to him. Litigation will only generate legal bills making his loss bigger.

This is the way I see it.

[mvweebles]

Originally Posted by CarlF

I was on the 2nd year of a 5 year charter contract on a Moorings boat in the BVI when 9/11 hit. This was before guaranteed contracts. My deal was I got 25% of gross charter income. After 9/11 that income fell by about 90% for a year.

In the end, the business came back. The Moorings stayed in business and still had customers. While I ended up a little financially the worse to wear. I certainly lost less on the Moorings boat than I did in the stock market after 9/11

I didn't have a mortgage on the boat. Just like buying stocks with borrowed money (e.g. "margin") - investing in a charter boat business using a mortgage just isn't very smart. It works out - until it doesn't. And then you're in trouble.

Looking back, I was incredibly lucky that the Moorings didn't go out of business. They maintained, insured, and stored the boat. And everything picked up where it left off. If they had failed, I and a few hundred others would have been flying to the BVI to try to move our boats (complete with Moorings logo) to another charter company. That would have been far worse.

If the OP only loses 6 months of "guaranteed" charter income - he should feel lucky - chalk it up to "lessons learned". If Dream Yachts goes out of business, he will just be an unsecured creditor at the end of a very long line. Many of those creditors (like banks) will be "senior" to him. Litigation will only generate legal bills making his loss bigger.

Sounds like The Moorings never stopped performing their contractual obligations despite the tragic event. DYC has. Maybe something magical happens in the charter business in September and that's when income normally starts to flow. I doubt it, but may be so. If DYC came forward with a credible plan of how it will survive, sticking with them might make sense. But chances are they need more cash than they have or are going to have in the foreseeable future.

For DYC owners, guaranteed income is probably the most important part of DYCs value proposition. That's now gone - DYC will have great difficulty using that as a differentiator, at least for several years. There will be a glut of suitable boats on the market with over extended owners who'd rather have 50% of something instead of 100% of nothing (the majority on this thread), DYC will restructure the deal, possibly via bankruptcy, possibly with a name change, but shedding a high percentage of boats along with turning off spigot for other obligations such as maintenance. Best case, the guarantee continues for some owners, but certainly not all. I'd rather finding a suitable landing zone sooner than later when I'm one of a herd

If the owner fetched his boat, he still has a contract and agreement. He could return it to the fleet when business picks up if DYC survives. He is out nothing but has mitigated his risk.

[CarlF]

Originally Posted by mvweebles

If the owner fetched his boat, he still has a contract and agreement. He could return it to the fleet when business picks up if DYC survives. He is out nothing but has mitigated his risk.

How does he mitigate his risk? If DYC goes out of business, he still owns the boat. But as long as they are in business, he doesn't have to pay insurance, dockage, or hire a captain to retrieve it.

I expect DYC would be thrilled to have the OP pick up his boat now. They would say he had thereby terminated the contract. One less boat on which to pay insurance and dockage. And once the boat is gone, what legal argument does he have that wouldn't be laughed out of court?

And lotsa luck getting DYC to take his boat back into the fleet after this is over. Why should they? They have a whole bunch of boats belonging to people who didn't pick up their boat.

If the OP had a good use for the boat or knew of another charter company that would pay him - then he should go get his boat.

But, of course, he doesn't have a better option.

[redneckrob]

Originally Posted by CarlF

How does he mitigate his risk? If DYC goes out of business, he still owns the boat. But as long as they are in business, he doesn't have to pay insurance, dockage, or hire a captain to retrieve it.

I expect DYC would be thrilled to have the OP pick up his boat now. They would say he had thereby terminated the contract. One less boat on which to pay insurance and dockage. And once the boat is gone, what legal argument does he have that wouldn't be laughed out of court?

And lotsa luck getting DYC to take his boat back into the fleet after this is over. Why should they? They have a whole bunch of boats belonging to people who didn't pick up their boat.

If the OP had a good use for the boat or knew of another charter company that would pay him - then he should go get his boat.

But, of course, he doesn't have a better option.

It important not to see this whole thing as adversarial, it's just business to you and DYC management. There are 3 possible scenarios here:

Scenario 1: DYC files for bankruptcy in the next year. No-one on this thread has posited any scenario where an owner is better off with their boat subject to creditors, mechanics liens, lack of care and attention....and all the rest that is inevitable in bankruptcy versus having possession of the boat themselves. So in this scenario, at least pending some logic none of us has come up with, unquestionably possession of the boat is clearly the best option.
Scenario 2: This whole thing blows over and we're back to normal 6 months from now. Does DYC have to take your boat back at that point? Absolutely not, you're correct. But if supply of boats and demand for charters was roughly in statis before (actually I think they were still a little short hurricane destroyed boats), demand is back to those levels, and no-one is putting new boats into DYC's program because they are all now aware of the massive risk they ignored or were ignorant of before, then where does DYC get their boats from? It's all business, DYC management isn't going to lose business in order to hold a grudge. They're going to call the boats they know the contacts for, know the general condition of, and know they can get back in charter more or less immediately....you. So under scenario 2 you're really no worse off for having mitigated Scenario 1 risk by taking possession of your asset.
Scenario 3: Things get better but stabilize at only half the business they had before. But remember, DYC has "guaranteed" income programs assuming the old normal, and now they're getting half the revenue. And their fixed costs are the same. And they're a thinly capitalized company. They simply physically won't have the cash to honor their contracts, they're going to have to cut them by more than half to all owners. At that point, if you had taken possession of your boat you could have sold it for up to a 50% discount on it's value and you'd still come ahead of sticking it out with DYC. That's even when you completely ignore the very real chance of Scenario 1 happening.

So bottom line, under no realistic scenario will you be worse off by taking possession of your boat as soon as you possibly can. Under every realistic scenario you'll either be worse off or at best neutral if you leave your boat with them. Feel free to tweak the scenarios to what you think is most realistic, but actually iterating the choices, assigning probabilities to each, and summing them to come up with an expected value is an immensely valuable exercise in a situation like this. The head in the sand hope strategy.... not so valuable.

[ol1970]

Originally Posted by redneckrob

The head in the sand hope strategy.... not so valuable.

I totally agree with redneckrob's breakdown above. DYC's system is a great business model for them, good for their customers (when times are good). The real dilemma is that most of the people who enter into this program do so not because they really want the boat at the end of the deal, it is that they want to go cruising a lot at various locations at a substantially discounted rate.

Add to the problem, most of these people cannot afford a $700k catamaran or $300k monohull that gets used 6 weeks a year. I've used DYC 3 times now and had great experiences but I would not want to own any of the boats we we cruised on. The marketplace won't want them either at the values that we were seeing before all of this went down. Oh, and all of these part time cruisers are the people making $100k-$300k a year that is getting nothing in this bailout in the USA and the easiest target for companies to cut. This will impact the rest of the market as well. Not forever though hopefully as everything does go in cycles.

My true fear in all of this is that the ability to go cruising as we know it will dramatically change forever. I almost don't see how it cannot change. If you are French Polynesia, sure your whole economy is based on tourism, but how can you not have health checks and mandatory quarantines (3-7 days minimum) moving forward? Doctors certification from your previous destination? Maybe they will choose their economy over lives? The real scary part is that this virus does not appear to the "the big one" with an extremely high death rate of 10% or something, the whole world is going to be on high alert, just like after 9/11 happened.

[letsgetsailing3]

Originally Posted by redneckrob

So bottom line, under no realistic scenario will you be worse off by taking possession of your boat as soon as you possibly can. Under every realistic scenario you'll either be worse off or at best neutral if you leave your boat with them. Feel free to tweak the scenarios to what you think is most realistic, but actually iterating the choices, assigning probabilities to each, and summing them to come up with an expected value is an immensely valuable exercise in a situation like this. The head in the sand hope strategy.... not so valuable.

You're worse off because 1) you travel at a time when it's dangerous for you and others, 2) you incur those travel expenses, and 3) you assume additional costs of keeping the boat elsewhere, maintaining it, and moving it, and 4) you've broken your contract (not them). Suddenly, they don't owe you guaranteed income any more. I'm not seeing how this is good for you.

Overall, I'm not seeing how you're better off with the actions you prescribe. I have to confess, I don't know the ins and outs of these agreements, though.

You seem to be really concerned about mechanics leans, which if I'm not mistaken would still be specifically related to your boat if the work were performed on your boat. This part I'm fuzzier on, as I don't know how significant maintenance is covered or communicated to the owner. I'd think DYC would be bonded and have insurance, so their shouldn't be leans placed on your boat.

[redneckrob]

Originally Posted by letsgetsailing3

You're worse off because 1) you travel at a time when it's dangerous for you and others, 2) you incur those travel expenses,

As I very specifically acknowledged in my previous posts (and as everyone else has as well), you should get your boat as soon as it's safe to do so, and as I also specifically stated earlier, if you'd taken the time to get to know your charter base staff, there are a bunch of newly laid off folks intimately familiar with your boat who I'm sure would be happy to take care of this for you!

Originally Posted by letsgetsailing3

3) you assume additional costs of keeping the boat elsewhere, maintaining it, and moving it.

We're talking about a hundreds of thousands to millions of dollars asset here, does the cost of paying someone in the BVI to move it for you and a few months of marina fees really stack up against that? And as again I specifically stated earlier, why would you expect them to be maintaining or even checking on your boat if you go with the default option? You may have to pay for this to get it in any event.

Originally Posted by letsgetsailing3

4) you've broken your contract (not them). Suddenly, they don't owe you guaranteed income any more. I'm not seeing how this is good for you.

First, they already broke the contract. Second, I just did an extensive post to explain why in any scenario you either aren't going to get the "guaranteed income" or they'll take your boat back regardless of if you "broke the contract" earlier. Do you disagree with any of my logic from my previous post? I must have done a poor job with it, because my entire point was that this "guaranteed income" is either gone for good or you're going to get it regardless of if you take your boat or not.

Originally Posted by letsgetsailing3

4) You seem to be really concerned about mechanics leans, which if I'm not mistaken would still be specifically related to your boat if the work were performed on your boat. This part I'm fuzzier on, as I don't know how significant maintenance is covered or communicated to the owner. I'd think DYC would be bonded and have insurance, so their shouldn't be leans placed on your boat.

If any work is done by a mechanic and they aren't paid, they can place a lien against the vessel. If DYC goes into bankruptcy, they're legally not allowed to pay any creditors. All creditors go into a pool and the bankruptcy court decides how much goes to each one. Insurance and bonding don't change this at all. But any lien's in place prior to the bankruptcy hold precedence. Bottom line, you have to fight your way out of that. And mechanic's liens are the easier problem compared to the creditors claiming that all the boats in the program are unsecured assets. That can take years to sort out, during which you'd be denied access to your boat and of course wouldn't get any of the so-called "guaranteed" payments. That happens almost automatically regardless again of any insurance, bonding, or work done on your boat. Massive risk. It's fine to think something along the lines of "Massive risk that would cost me $1M if it happened, but only 10% chance of it happening so the expected value of that is a loss of $100K. It's head in the sand to act like that risk is zero or ignore it. That's my only point.

[mvweebles]

If an owner chooses to ride this out, make their payments, and hope for the best, there is a very real possibility this moment will be the one he/she looks back on and says "I should have known.....the signs were there, I was just didn't want to believe them."

Maybe it all works out for the best. Heck, there was a recent thread where someone said they had purchased a catamaran sight unseen, including using a surveyor recommended by the broker and a delivery crew also recommended by the broker. He was happy as a clam about the way it worked out. Crazy approach that had a near zero chance of working out well, but it did. I wouldn't want to bet on it working again, but I recognize its plausible. As someone once sad, "God watches out for Drunks and Sailors."

RedneckRob - would add one scenario to your list: OP suspends his/her obligations for 6-months, meaning he essentially walks away from the deal until such time as it is viable.

[letsgetsailing3]

Originally Posted by mvweebles

RedneckRob - would add one scenario to your list: OP suspends his/her obligations for 6-months, meaning he essentially walks away from the deal until such time as it is viable.

I'm really confused by your commentary here.

If I understand it correctly, you are responsible to a lender for your mortgage payments. The charter operation is responsible to you for "guaranteed income".

Walking away from your charter operation doesn't relieve you of responsibilities to your lender. There is still a lien on your boat. Walking away just deprives you of a marina and insurance.

I'm just not understanding you guys' math. Are you suggesting that you walk away from the lender and default on your loan as a way to get back at the folks who aren't paying your mortgage? The lender still has a lien on your boat, and even if the charter operation goes bankrupt you won't own the boat. If the charter operation goes bankrupt, the lender will be capable of retrieving their assets (in this case, the boat you made a down payment on and defaulted on).

I'm just not understanding the proposed solution as a complete one.

[KC375]

Originally Posted by mvweebles

....

RedneckRob - would add one scenario to your list: OP suspends his/her obligations for 6-months, meaning he essentially walks away from the deal until such time as it is viable.

Don't count on the mortgage holder walking away from their rights for six months. After six months when the "owner" decides to start honouring their obligations they may find the boat is legally no longer theirs but up for or already sold in a repo auction...

[KC375]

So here is a question for you conspiracy theorists?
What evidence is there that DYC has suspended guaranteed payment?
Who would benefit from spreading rumours that DYC was on the ropes?
The only evidence that DYC has taken the drastic step of suspending payments is two posts from the OP at the beginning of this thread 8 pages ago. The OP has not been present since then. The OP has never made any other posts on this site. Probably not the most credible of sources absent other evidence of bona fides.
If DYC has actually done this I would think googling might turn something up. No luck but those with better google skills than I may find something. If so please post.
I’ve reached out directly to DYC to see if they care to share a response. If anything interesting comes of it I’ll post more.

[redneckrob]

Originally Posted by letsgetsailing3

I'm really confused by your commentary here.

If I understand it correctly, you are responsible to a lender for your mortgage payments. The charter operation is responsible to you for "guaranteed income".

Walking away from your charter operation doesn't relieve you of responsibilities to your lender. There is still a lien on your boat. Walking away just deprives you of a marina and insurance.

I'm just not understanding you guys' math. Are you suggesting that you walk away from the lender and default on your loan as a way to get back at the folks who aren't paying your mortgage? The lender still has a lien on your boat, and even if the charter operation goes bankrupt you won't own the boat. If the charter operation goes bankrupt, the lender will be capable of retrieving their assets (in this case, the boat you made a down payment on and defaulted on).

I'm just not understanding the proposed solution as a complete one.

Not sure anyone ever suggested not paying your loan payments? If you don't have the cash to make 6 months of loan payments on your $1M boat then you're screwed either way and there is no good complete solution, right? How does staying with a company not paying you help you out there? Again, my entire premise is that you won't be worse off by taking possession of your boat and in most cases will be better off because you have an asset that you have control of and at see point can sell if you can't find another use for it. Not that you'll be made whole. We're talking least worst solutions here.

I'm not even sure you can count on a financially distressed company paying their slip fees or insurance. And unless they pay for insurance that names you the sole beneficiary, having them pay for insurance isn't really protecting you in this scenario. Certainly those two items, even if they were "guaranteed", don't outweigh the huge risks. Again, do an expected value calculation, assign whatever probabilities you think are valid and sum them up. Unless you assign a value of zero or near zero to the eventuality of a DYC dramatic reduction in bookings or bankruptcy, then that methodology will clearly show the least worst solution is having possession of your boat.

There are two options here: methodically thinking through all the scenarios and outcomes and weighting them, or hoping for the best. I'm not sure how you could argue against the former in favor of the latter?

[redneckrob]

Originally Posted by KC375

So here is a question for you conspiracy theorists?
What evidence is there that DYC has suspended guaranteed payment?
Who would benefit from spreading rumours that DYC was on the ropes?
The only evidence that DYC has taken the drastic step of suspending payments is two posts from the OP at the beginning of this thread 8 pages ago. The OP has not been present since then. The OP has never made any other posts on this site. Probably not the most credible of sources absent other evidence of bona fides.
If DYC has actually done this I would think googling might turn something up. No luck but those with better google skills than I may find something. If so please post.
I’ve reached out directly to DYC to see if they care to share a response. If anything interesting comes of it I’ll post more.

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.

[mvweebles]

Originally Posted by letsgetsailing3

I'm really confused by your commentary here.

If I understand it correctly, you are responsible to a lender for your mortgage payments. The charter operation is responsible to you for "guaranteed income".

Walking away from your charter operation doesn't relieve you of responsibilities to your lender. There is still a lien on your boat. Walking away just deprives you of a marina and insurance.

I'm just not understanding the proposed solution as a complete one.

Understood - no idea how the financial arrangement is worked out, but I would assume there is a preferred mortgage holder that works with DYC's marketing group to underwrite loans when needed. Regardless, the OP would be responsible for the asset and any shortfall if the selling price did not cover the mortgage. So yea, defaulting on a major loan would have consequences, just as walking away from house mortgages did in 2008. But it's a Scenario that may make sense for someone, especially since, as many others have mentioned, there could be an explicit or implied benefit from Force Majeure. Assuming DYC did actually send a letter, I would definitely not suggest blindly halting payments as DYC allegedly did, but rather calling the lender and letting them know - in a nice way - that they get paid when I get paid.

The post prior to this brings up a good point - the OP is in the wind, there is no Google of DYC defaulting, so who knows - maybe a disgruntled employee spreading rumors. So I do agree, this is an allegation - my earliest posts qualified my opinions with "assuming the OP is correct...." Given this thread now has several thousand views, a statement from DYC would be great if they can provide.

That said, any company that is guaranteeing ROI income on vacation assets is in trouble right now.

[svlamorocha]

Originally Posted by jim King

My boat is with Sunsail and, while we have not had word from them yet as to whether we will be getting a check this month,

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