Buying Catamaran from Sunsail (TUI Marine)

[Gerrit Coetzee]

Originally Posted by KC375

Neither an insurance payment from two years ago nor an existing large order of boats is evidence of Moorings' ability to survive a massive loss of revenue.
If the insurance payment was converting capital equipment (damaged boats) into cash then that would be encouraging. Two reasons to not expect that is true:
1. Much (or all) of that payment probably went to paying of debt secured against that capital equipment. So yes that would reduce the carrying costs but
2. The order for 200 boats means cash had to go out the door for deposits, progress, payments, final payment...etc. and there will be debt in some form secured against those boats...and you can count on the boat builder (or their receiver) going after moorings to honour any purchase contracts.

As stated, the chances are unlikely, but not impossible.

Moorings/Sunsail is the biggest owner charter company in the world and their affiliate Robertson & Cain the second largest boat builder in the world, with branches everywhere where it matters.

They exist for 50 years since 1969

Although I cannot guarantee their continued success, I believe you can neither doomsay their downfall.

What I am saying, is to have an objective perspective.

Their chance of collapsing after C19, is like saying Loyds of London is to perish after 1 hurricane season.

It is just tiring to encounter pessimism in the face of substantial evidence to the contrary , especially if it rob others of a chance to their happiness.

[Alistair242]

It is a huge cash churning concern and of course they will not drop off the end of the planet. There continues to be a healthy market for both buyers and charter guests and these companies have an extensive and experienced infrastructure in place.There may need to be some restructuring and/or tinkering, as there has been over time, but the product itself is fundamentally a good one. Im sure they like many are feeling the heat now.
Purchasing a boat that is maintained, insured and allows you to sail X amount of weeks in premier destinations around the world for the course of the contract all while earning a guaranteed income is attractive to many.
However, having been involved directly in managing many of these boats and in their phase outs, it would have to be a really well looked after and lightly used boat that I would buy out of their charter fleets. These are few and far between.

[KC375]

Originally Posted by Gerrit Coetzee

As stated, the chances are unlikely, but not impossible.

Moorings/Sunsail is the biggest owner charter company in the world and their affiliate Robertson & Cain the second largest boat builder in the world, with branches everywhere where it matters.

They exist for 50 years since 1969

Although I cannot guarantee their continued success, I believe you can neither doomsay their downfall.

What I am saying, is to have an objective perspective.

Their chance of collapsing after C19, is like saying Loyds of London is to perish after 1 hurricane season.

It is just tiring to encounter pessimism in the face of substantial evidence to the contrary , especially if it rob others of a chance to their happiness.

I’m not taking a position on the likelihood of Moorings surviving. I’m just observing that a couple of factoids like insurance claim and order volume do not financial analysis make.
As to size, on its own it is not particularly predictive. Hertz was number one for eons, more recently number two in the US ...and this week they are no more.
To suggest that a single hurricane’s effect on Lloyds is in anyway an analogy to covid 19’s effect on a leveraged business dependent on discretionary spend and airline travel is well, not particularly useful.

[Jackofall]

Originally Posted by Gerrit Coetzee

As stated, the chances are unlikely, but not impossible.

Moorings/Sunsail is the biggest owner charter company in the world and their affiliate Robertson & Cain the second largest boat builder in the world, with branches everywhere where it matters.

They exist for 50 years since 1969

Although I cannot guarantee their continued success, I believe you can neither doomsay their downfall.

What I am saying, is to have an objective perspective.

Their chance of collapsing after C19, is like saying Loyds of London is to perish after 1 hurricane season.

It is just tiring to encounter pessimism in the face of substantial evidence to the contrary , especially if it rob others of a chance to their happiness.

It does not matter how old or big XYZ company is, once they are bought out by a by these LBO firms. The gradual bleeding until death for sole benifit of excecutive wallet filling is the name of the game Every. Single. Time. Its an actual business model to destroy a company. They even made a docu about called "They day Mitt came to town" I believe. Its about Mitt Romney and Bain Capital. Its disgusting that this practice is even legal. It seems to be the norm nowadays.

[Dr. Sea]

Originally Posted by Jackofall

It does not matter how old or big XYZ company is, once they are bought out by a by these LBO firms. The gradual bleeding until death for sole benifit of excecutive wallet filling is the name of the game.

I don't know anything about the hedge fund or LBO that bought Moorings/Sunsail, but we have seen this happen with other fine companies. Two Dutch investors bought Oyster, one of the premier yacht companies, bled it of cash, tried to cut corners and live on the Oyster reputation, and then filed bankruptcy to walk away from any obligations. Fortunately Oyster was purchased in bankruptcy by a yachtsman who loves the Oyster boats and brand. He has maintained the quality of the boats, continued the strong support that Oyster has always provided to its clients, saved Oyster's reputation, and is making money. If Moorings/Sunsail were to suffer the same fate, I hope a buyer who loves the charter business and knows of the reputation that Moorings and Sunsail have built would come along, buy the company on the cheap, and then run it right.

[capn_billl]

I stonewalled the seller that insisted on 10% down.

I'm not wiring that kind of money anywhere on a one sided contract.

I sent a check for $1000, a letter of intent, and a signed contract.

Want me to buy the boat? The fact that I'm spending thousands for haulout, survey, and loan application should be sufficient proof I'm "serious about buying the boat".

If the deal falls through they can go to the backup buyer. An option I don't have.

If the deal succeeds they will know I'm serious when the full purchase price of the boat hits their account.

[KC375]

Originally Posted by Jackofall

It does not matter how old or big XYZ company is, once they are bought out by a by these LBO firms. The gradual bleeding until death for sole benifit of excecutive wallet filling is the name of the game Every. Single. Time. Its an actual business model to destroy a company. They even made a docu about called "They day Mitt came to town" I believe. Its about Mitt Romney and Bain Capital. Its disgusting that this practice is even legal. It seems to be the norm nowadays.

Private Equity do make good villains regardless of the facts. Certainly in some cases they are villains. (Conflict disclosure – I’ve twice been backed by private equity)
The only well done peer reviewed study I’ve seen on the impact of private equity comes up with quite a different picture. I went looking for evidence as the negative perception made running a PE backed business a bit more challenging. This was in the UK about 10 years ago so there may be subsequent studies or updated information.
The actual facts (in that study at that time) were that PE backed firms over the first year or two of ownership reduced employment and costs substantially compared to the non PE back peer group. BUT over a longer period (5+) years, the PE backed firms out stripped their peer groups in growth in employment, revenue, and EBITDA. The comparison period was from the point of acquisition so the superior growth included the period of restructuring.
Private Equity returns consistently outpace public market returns. Sure there are some dodgy deals but you can’t have such pronounced sector wide outperformance on the basis of consistently destroying companies.
I’ve been exposed to governance conversations in a number of large publicly traded companies and three PE backed companies. It’s the public traded companies that are short term focused sweating next quarter’s numbers and this year’s numbers. In a PE backed firm it is not fun at the board if you’ve missed ANY number but the intensity of focus is on producing the strongest business three to five years out. If you’ve missed your numbers and you don’t get fired then the conversation very quickly turns to how to we make things strong over the long run. Strongest not meaning peaking the numbers but able in 3-5 years to demonstrate under robust diligence that not only has performance trend up over 3-5 years but it will continue to improve over the next 5 years.

[KC375]

Originally Posted by Dr. Sea

I don't know anything about the hedge fund or LBO that bought Moorings/Sunsail, but we have seen this happen with other fine companies. Two Dutch investors bought Oyster, one of the premier yacht companies, bled it of cash, tried to cut corners and live on the Oyster reputation, and then filed bankruptcy to walk away from any obligations. Fortunately Oyster was purchased in bankruptcy by a yachtsman who loves the Oyster boats and brand. He has maintained the quality of the boats, continued the strong support that Oyster has always provided to its clients, saved Oyster's reputation, and is making money. If Moorings/Sunsail were to suffer the same fate, I hope a buyer who loves the charter business and knows of the reputation that Moorings and Sunsail have built would come along, buy the company on the cheap, and then run it right.

I think the sponsors who bought moorings are both more sophisticated and deeper pocked than those who bought oyster.
Moorings/sunsail were purchased from TUI by KKR (of Barbarians at the Gate fame) – I think for around $400 million of which most was probably debt. With over 20 funds and over 100 billion raised KKR have had some mistakes but generally their track record is pretty good. They develop a very sophisticated understanding of the businesses they own. To give you a sense of their judgment I’ve pitched to them twice and been turned down twice so that suggest they know what they are doing...
KKR – like any clear minded investor – understands equity is a call option on the assets of the company. If the assets becomes worth less than the strike price (paying off the debt) then they will walk, or at least renegotiate the debt to spread the pain among classes of capital providers. A highly leveraged company like moorings that is very exposed to cyclical and seasonal revenue stream that has just entered a deep and possibly extended loss of revenue....well that looks like a business that may end up being worth less than the debt secured by it.

[Boat Guy]

Originally Posted by KC375

Private Equity do make good villains regardless of the facts. Certainly in some cases they are villains. (Conflict disclosure – I’ve twice been backed by private equity)....... Strongest not meaning peaking the numbers but able in 3-5 years to demonstrate under robust diligence that not only has performance trend up over 3-5 years but it will continue to improve over the next 5 years.

You bring up valid points and I'd be interested in those studies, if available.


I think you're quite right about the 3-5 yr mark as that's when the investors are looking to jump out and take their returns. In my review, they try to get it one way or the other. In other words, if it goes south they will put it on the creditors and I think it's more the cold hardheartedness of business that leads to their rep.

All I know is, when I learn PE has entered the building, my investigation perks up...

[KC375]

Originally Posted by Boat Guy

You bring up valid points and I'd be interested in those studies, if available.


I think you're quite right about the 3-5 yr mark as that's when the investors are looking to jump out and take their returns. In my review, they try to get it one way or the other. In other words, if it goes south they will put it on the creditors and I think it's more the cold hardheartedness of business that leads to their rep.

All I know is, when I learn PE has entered the building, my investigation perks up...

I did a quick search of my hard drive and tried Googling. The study I referred to is at least a decade old so not easy to find.
Here is a McKinsey & Co fluff piece that’s not very rigorous but describes some of the governance differences. Here is a Forbes article – referring to a more recent academic study – consistent with the one I referred to but missing the point. The Forbes study points out improved economic returns but reduction in employment etc over a two year period. As the average hold period is now 5+ years the study misses the point. The benefits of PE ownership for employment and the community show up after the performance improvement/transformation period of ~2 years. PE firms want to exit after proving they have improved performance and while there is visibility into multiple more years of continued improvement.
The other thing to remember is that successful PE firms (multi fund multi decade) are terribly sensitive to reputation. The conversations with debt holders when things are going not so well are very frank and grown up but fair. These funds need debt for their next deal so they can’t have a reputation for screwing lenders. That’s not the same as no losses for lenders. It means they try to be very transparent about the risks involved in putting deals together so every one prices their capital appropriately knowing sometimes there will be losses.

[redneckrob]

Originally Posted by KC375

I did a quick search of my hard drive and tried Googling. The study I referred to is at least a decade old so not easy to find.
Here is a McKinsey & Co fluff piece that’s not very rigorous but describes some of the governance differences. Here is a Forbes article – referring to a more recent academic study – consistent with the one I referred to but missing the point. The Forbes study points out improved economic returns but reduction in employment etc over a two year period. As the average hold period is now 5+ years the study misses the point. The benefits of PE ownership for employment and the community show up after the performance improvement/transformation period of ~2 years. PE firms want to exit after proving they have improved performance and while there is visibility into multiple more years of continued improvement.
The other thing to remember is that successful PE firms (multi fund multi decade) are terribly sensitive to reputation. The conversations with debt holders when things are going not so well are very frank and grown up but fair. These funds need debt for their next deal so they can’t have a reputation for screwing lenders. That’s not the same as no losses for lenders. It means they try to be very transparent about the risks involved in putting deals together so every one prices their capital appropriately knowing sometimes there will be losses.

I think all that you say can be true but also irrelevant to this situation. This isn't about if the company is well run or has good governance. It's about the fact that it's highly leveraged and just took a massive hit that couldn't have been imagined by even the best run and best governed company. No amount of governance is going to help you in this situation, and as a previous poster pointed out KKR is going to walk when they've burned through their equity which has probably already happened. They don't even get a reputational hit with lenders defaulting on this, it truly wasn't foreseeable and in no way KKRs fault. Lenders will get that or else they'll stop lending to any PE firm because they're all going to take several hits like this one.

[KC375]

I completely agree with your assessment, it aligns with mine.
I was simply pushing back on the broad brush demonization of PE firms as deranged descendants of Vlad the Impaler.
The decisions will be rational and potentially constructive. If it get’s to it KKR will have some grown up conversations with the lenders. If the operating asset (moorings) has some long run/future value all parties will want to find a way to preserve that. It may be that the banks simply take ownership (almost never happens, what bankers wants to manage a charter company) more likely the lenders will take a big haircut in exchange for equity providing some capital infusion that may also be accompanied with additional debt funding.

Any recapitalization will likely more or less wipe out all unsecured creditors and be a real pain in the assess for anyone with financial entanglement of any form with the operating entity.

[Boat Guy]

Truth be told I'm sitting with dry powder to pick up a "distressed asset" .... Be it Sunsail or any other player...



I guess we'll have to see what transpires

[Cool Hand Luke]

Originally Posted by MikeFergie

Yes it’s normal for sunsail and moorings to ask for the deposit which is 10% of the value and they put this into their escrow account. This blocks the boat from being sold to anyone else. You then do the survey and haul out if you wish ( which you pay for). If the survey ER finds things needing work they will fix them or discount the boat a bit for you. If the survey is good and you walk away from the deal then you lose your deposit.

That’s how it worked in 2015 when I bought my boat from them.
Don’t let the prophets of doom here deter you if you like the boat and are set on it. Moorings sunsail are the biggest so safer than any of the others

Same experience here in 2016. I bought in 2016. Sent them the 10% and never worried that I wouldn’t get it back if I walked away from the deal.

I was going to get a Beneteau 43 but then it was in poor shape. I walked away. Then found a Jeanneau. They were going to send me the $$$ back but I just said to apply it to the Jeanneau. The survey found things they needed fixing. They did fix it. They’re happy because they sold a boat. I’m happy because I got a great deal and In the past 4 years, nothing major broke or came out from the dark. But I do maintain her very well.

So. In the end. If you like the vessel and she’s the right match for you, go for it

[SVHarmonie]

Originally Posted by capn_billl

I stonewalled the seller that insisted on 10% down.

I'm not wiring that kind of money anywhere on a one sided contract.

I sent a check for $1000, a letter of intent, and a signed contract.

Want me to buy the boat? The fact that I'm spending thousands for haulout, survey, and loan application should be sufficient proof I'm "serious about buying the boat".

If the deal falls through they can go to the backup buyer. An option I don't have.

If the deal succeeds they will know I'm serious when the full purchase price of the boat hits their account.

If I was selling my boat and you came to me with this deal, I'd send you back your check and contract, and tell you I was very happy you were a serious buyer, and if you wanted to pay to haul and survey the boat, I'd be happy to take your money once you were satisfied it was the boat you wanted.

But if you expect me to take my boat off the market for measly $1000 deposit--you are smoking dope. If you are lucky, the boat will still be available when you are ready to buy, or you could lose out to somebody with a check for 10% in hand and a contract that we agree on, and I wouldn't cry a drop for your lost haul and survey costs.

This is just a petty and silly way to approach boat buying. The standard contract used in the USA is not at all "one-sided" and basically makes the sale of the boat contingent on a "satisfactory" sea trial. They buyer gets to decide what is satisfactory, so your 10% really isn't even remotely at risk. Someone who needs to do things in a way totally contrary to normal business practice is just waving red flags, and is not someone I want to do business with. They will be way more trouble than they are worth.

Same if I was buying a boat. I expect to put 10% down, and expect that in return the buyer takes the boat off the market and ignores any competitive bids while we work out the final deal. When I was buying my current boat, we had reached a deal, I wired my 10% and then someone came along the next day with a significantly higher offer. But we had a contract, and the owner was honorable, and we closed as scheduled.