Unlike the commercial shipping world, buying a superyacht with cash is commonplace

There are a number of reasons that people choose to use finance, including funding either the purchase price of a pre-owned superyacht, the refinancing of a superyacht you already own, the purchase price of a new build superyacht, the construction price of a new build superyacht or the cost of refit works.

It is common for banks to expect you to put 30 to 50 per cent of your own money into the project before they will contribute.

Even if the finance has been approved, it is common for an extensive list of documents and actions to
be completed before any money is paid out. The bank will ask for any number of legal and tax opinions, which you will have to pay for. Is the superyacht structure lawful and typically recognised for superyachts sailing into EU territorial waters? Are all requirements for non-EU structures complied with? What might be the tax implications?

The bank will want to see evidence of the borrower’s (and any other party providing security) authority to enter into the documents in the form of resolutions of the directors of the company and perhaps also the shareholders and evidence of the authority of any signatory to sign documents on behalf of such company in the form of a power of attorney.

If there is a mortgage to be registered over the superyacht, the flag state will have its own requirements in relation to any notarisation or legalisation of a power of attorney.

The company entering the loan agreement should have the sole purpose of acting as owner and operator of the superyacht being financed and should hold no other assets.

The bank will consider the security risk on any superyacht. More specifically, with superyacht construction, the bank will also consider the risk of the shipyard going bankrupt. The bank’s concern would be to ensure that its security is protected from third party creditors and that it ranks prior to the yard’s creditors with respect to the superyacht. They will want to know that the owner has clean and full ownership of the superyacht capable of being enforced in the event of default under the loan agreement.

Does the superyacht represent the main security granted to the bank to guarantee repayment of the loan?

Generally, until a superyacht is almost 80 per cent completed, the value of the construction never corresponds to the actual money already paid into the project. The bank would always require additional security both pre and post-delivery, including personal guarantees by the beneficial owner covering any and all amounts due by the borrower to the bank under the loan agreement.

Other security may vary from corporate guarantees, account charges and share charges to assignments of the shipbuilding contract, earnings and insurances and undertakings from the managers that their rights will be subordinated to those of the bank.

When the bank is financing a pre-owned superyacht, they will arrange a valuation and inspection survey of the superyacht and will often request an inventory of all items on board the superyacht.

Insurance and liability

Is the superyacht properly insured during the build process and after delivery? Are benefits under the relevant insurance policies properly assigned to the bank as security? The bank may also request that you cover the cost of any mortgagee’s interest insurance.


The borrower will give many covenants including financial, operational and insurance undertakings, representations or warranties. If you fail to comply with any covenants then the bank can call the loan in.

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 amend mentor 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.

• 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.