Dream Yacht suspending Guaranteed Charter Income payments

[Group9]

Originally Posted by belizesailor

The best legal advice any attorney can give you is to say out of court.

Practicing attorneys soon learn that in litigation, there is really one fight and one fight only. And, that fight is, the party that thinks they are going to win is trying desperately to get into court for their hearing on the merits. While the party that thinks they are going to lose, tries just as hard to stay out of court.

After years of practice, I learned, that this really is the whole fight.

[Montanan]

Looking at DYC charter offers they are presently deeply discounting 25% to 35% across all locations.

Correction to previous post, they have 1,202 yachts in 60 locations. That is a massive fleet with heavy commitments.

[Cadence]

Originally Posted by Montanan

Looking at DYC charter offers they are presently deeply discounting 25% to 35% across all locations.

Correction to previous post, they have 1,202 yachts in 60 locations. That is a massive fleet with heavy commitments.

That has to be 1202 other peoples yachts. I'm not faulting them who would have anticipated this but it would seem the people that have the notes are those that have the liability. DYC people can just walk away.

[KC375]

Originally Posted by Montanan

...

About Fountaine Pajot
.... Again data is available on FP.

About NextStage
.... Accueil -
One can readily obtain data on this company.

It’s been a while since I analyzed French companies so I could be misreading.
FP’s stock is trading at its lowest in three and half years with a market capitalization just under 100 million euros.
The financial statements from last year show a net of about $11 million euro...that’s 5% of revenue so not particularly robust and down from 8% the year before. FP is not the only shareholder of dream yachts etc and obviously FP and NexStage would try to access outside funding sources if they wished to support Dream Yachts...but to put things in relative size...last year’s FP earnings per boat in dream yachts comes to a bit less than 750 euros per month...that doesn’t go far financing a charter boat.
Another way to look at the relative leverage of the charter business...NextStage and Fountaine Pajot acquired a majority interest in DYC for 25 million euros so maximum value of DYC was 50 million euro...divided by 1200 charter boats...about 40k per boat...that gives you a sense of the relative capital in the game from DYC vs owners of the charter boats.

[contrail]

The BVI is indeed closed. No one coming or going. No boats coming or going. Additionally, we are in a lockdown period of six days, which many think will be extended. That specifically means stay at home, except for a few exceptions, mostly emergency or truly essential, like garbage and so forth. It means no activity on or in the water (including swimming, if you are on a boat). Penalties range up to a year in jail or $5000 fines. This is designed to break any cycle of spread of COVID-19, and, one suspects, to enforce security, although this is not said. We currently have had our first two positive test results. 25 have been negative, we are waiting on a further nine, and 117 people are under observation and quarantine. Sadly, the two persons who have tested positive had just returned from New York, in one case, and Europe, in another, and are well employed. Whilst one hopes for their recoveries, one also hopes they have time to contemplate what they have done to local society and the economy, by, shall we say, an individualized approach to quarantine which has now required this lockdown. Almost all crewed charter yachts are now anchored out, mostly at Peter or Norman Island, not allowed to move or do anything. Personally, I have six weeks of supplies aboard, and I think that may be the norm. None of us want to get the virus.


All the charter companies (including Dream) were trying to re-book their charters, essentially moving everything downstream for some period. The company to whom I am closest, personally, managed to do that with all their charters. I think this has been fairly normal. So, the hope is that after an undetermined time out, demand will return and cash will flow again. Obviously, different companies have different reserves, but a lot of honest and responsible belt tightening is going on. It would, I think, be a mistake to write off the industry, although many who don't understand may try to do so. I think that in many parts of the world, and in many different industries, it's going to take some patience, and that includes financial patience, to get things humming as before. Some may find they don't have the patience, and others may find they don't have the reserves. But, we did make it back from Irma, and that was not just a blip!


What is crucial is how soon the virus gets tamed, whether by vacine, cure, or the weather. At that point, the BVI charter industry, at least, will come back pretty quickly.


As a disclaimer, I have nothing to do with Dream or other charter fleets, other than friendly relationships. I do, however, own and operate and live on a crewed yacht based here, doing both instructional and regular charters, and I do understand how the industry works, at least here.



I don't think it is accurate do describe the bareboat industry as a "time-share", by the way. A charter yacht is owned by an individual, who gets anything from an enumerated number, to an infinite number, of weeks aboard. Companies with multiple bases often allow dates to be traded among its bases. There are multiple payment options, varying from a "guaranteed" income with no further expenses, to nothing guaranteed but a percentage of income, usually in the 60-70% range, out of which come all expenses. Both models work, at least here. There are different periods after which yachts come out of charter and are either kept or sold, different ages of yachts in different fleets, which also govern the charter rates, and different policies regarding any refits after charter service. Ultimately, there is one owner owns the boat, at least after it is paid off.


Time-share, on the other hand, is ownership of a week, or whatever, at a particular property that may, or may not, be traded to another property, elsewhere. Other folks "own" the other weeks, and no one really owns anything as the contract is for a set number of years. Sailing clubs have several models, and I don't know enough to make any generalizations. But time share and the bareboat industries are very different other than the idea of absentee owners and local management.



By the way, if Dream was started in the Seychelles, as someone posted, then it is not surprising that it's legal based might be in Mauritius. It may also be worth remembering a major legal case that FP lost several decades ago, that severely compromised their US operations.



I hope this all helps.

[redneckrob]

Originally Posted by wizoc

2- Whoever said releases are unenforceable isn't a lawyer. Just look at the cases in the dive industry where releases are upheld in most cases-the exception being when you are forced to sign them as you board the boat.

Are you a lawyer? Either way, would love to see the case law for a case where gross negligence was proven but the defendant was found not liable by way of a signed waiver?
Regardless, my point was that just because Dream Yacht Charters is doing this doesn't make it legal, and in fact it's possible that their lawyers even instructed them to do this knowing that it wouldn't withstand challenge, since that is a common and accepted business law practice. So go talk to a lawyer BEFORE you even think about signing any contract mod they give you, I think we can both agree on that. And my overriding point is that if you can use their break of the contract to take possession of your boat back, you absolutely should

[mvweebles]

Originally Posted by Dr. Sea

This sentence from mvweebles summarizes the best advice. Forget the legal skirmish. As many have commented, that is a losing game. But what about mitigating losses and protecting your asset?

Mitigating. Not much you can do here, unless your boat is located in a place that you can go to it and use it while it is out of charter. At least you will be getting some value for your monthly investments. Some countries like BVI are absolutely closed to anyone who isn't already on the island, so you may not be allowed to go to your boat, at least for a while.

Is your boat really out of charter? Is Dream Yachts continuing to use it while paying you nothing? You need to find out. Even if you can't physically go to your boat, you need to contact someone on the island to find out.

There may be help from American banks if you have financed it through one of them. In California several banks are offering 30-90 day moratoriums on mortgage payments. If your bank is one of them, this could mitigate the financial crunch you will be feeling for the next 6 months. When I had a boat in the Sunsail fleet I set my mortgage payments to equal the guaranteed lease payment from Sunsail. I know how much it would have hurt to have to make these payments with no help from Sunsail.

Protecting. If Dream Yachts is floundering financially, it is quite likely that they are scrimping on yacht maintenance. This would be a significant concern of mine for a boat that I can't see and examine. Find out what they are actually doing to maintain your boat. Get someone on the island to check on your boat. Also insurance. Make sure that you have been personally in touch with your insurer. Don't accept any of Dream Yachts' assurances. They assured you monthly lease payments.

It seems reasonable to assume that Dream Yachts is in serious financial trouble or I don't think they would have taken this extreme step. The "optics," as the politicians say, are terrible. Dream Yachts has been presenting itself as an equal competitor with Moorings and Sunsail. Unless one or both of these follow suit and stop payments to their owners, Dream Yachts has taken itself out of the competition for the foreseeable future.

Good luck. Please keep us posted. I'm sure there are plenty of other CF readers who are keeping an eye on this situation.

Just get the boat even if your standing is questionable. I'm sure you have usage rights - take the boat and don't return. Let them come after you. Believe me, coming after you would be close to the bottom of their list right now.

Protect yourself.

[belizesailor]

Originally Posted by Montanan

FYI:

A bit of information regarding DY's ownership and capital position.

Fountaine Pajot and the investor Next Stage take control of Dream Yacht Charter, world number 2 in yacht charter. The multihull yard and its partner want to accompany the development of Loïc Bonnet's company.

Briag Merlet
Published on July 31, 2017
Acquisition of majority shareholding
Next Stage, a specialist in equity investment in medium-sized companies, and the Fountaine Pajot shipyard have announced that they have entered into exclusive negotiations with the Dream Yacht Charter group to acquire a majority stake. This capital investment of ?11 million for Fountaine-Pajot and ?14 million for Next Stage is a first step in the group's long-term industrial support policy. It should be noted that Next Stage has already acquired a stake in Fountaine-Pajot in 2016.

The transaction is expected to close before October 2017.

Funds for further development
Dream Yacht Charter was created in 2001 by Loïc Bonnet. With a first base of only 6 yachts in the Seychelles when it was created, the company is now present in the main navigation basins of the globe, through a fleet of more than 850 boats positioned in 47 bases. With his partner Romuald Caillaud, Loïc Bonnet had until now succeeded in self-financing the company's development, whether through internal growth or external acquisition. The company, which posts a turnover of 90 M € in 2016, will now rely on its new shareholders to consolidate and pursue its industrial development, in a boat rental market in full mutation with the development of collaborative practices and boat clubs.

Synergies
By taking a stake in Dream Yacht Charter, Fountaine-Pajot takes a prime position in the boat rental market, where multihulls dominate. The rochelais yard is supported in this investment by one of its own shareholders. Synergies will emerge, as Nicolas Gardies, Managing Director of Fountaine Pajot explains. "This association with Dream Yacht Charter and NextStage is totally in line with Fountaine-Pajot's growth strategy. It reinforces our company's position in the rental world, where Dream Yacht Charter occupies a central place, particularly in the catamaran segment. This alliance will benefit from the remarkable dynamics of each of our two companies and the development of all possible complementarities."

Probably not a bad long term buy, maybe very long term, and FP is a relevant partner at least. Obvioulsy DYC is in need of cash or they would not make this deal.

I think DYC actually holds a lot of mortgages on boats in their fleet, but I dont know the details. Thats an unusual strategy and now would be a VERY bad time to hold charter boat mortgages.

[belizesailor]

Originally Posted by KC375

Belize under normal course of business I think you are right that they would operate within their contractual obligations. And I'm confident they did get legal advice, which might even have told them they are not entitled to do what they did.

Once a business head towards a liquidity crisis / insolvency...well normal behaviour no longer applies.
If you look like running out of cash in weeks to a month or two you worry much more about cash than contractual obligations. If you don’t survive the trustee in bankruptcy will sort it out for you. If you survive long enough to face a few counter parties in court, well that’s a big win.
Ignore the contract, stop the cash going out the door, save the company, try to make it up later to the folks whose contract you violated.
Somewhere in that process the board of directors had better be getting their own legal advice as they may suddenly be on the hook for real obligations if they did not supervise management properly.

Yes, worst case, you do what you need to do and sort it out later.

See the post below about them pursuing a deal to sell a majority stake. That sure sounds like cash crisis motivated to me.

[belizesailor]

Originally Posted by Montanan

Looking at DYC charter offers they are presently deeply discounting 25% to 35% across all locations.

Correction to previous post, they have 1,202 yachts in 60 locations. That is a massive fleet with heavy commitments.

1,202 yachts plus overhead will chew thru $11M pretty quickly.

[a64pilot]

Originally Posted by redneckrob

Are you a lawyer? Either way, would love to see the case law for a case where gross negligence was proven but the defendant was found not liable by way of a signed waiver?
Regardless, my point was that just because Dream Yacht Charters is doing this doesn't make it legal, and in fact it's possible that their lawyers even instructed them to do this knowing that it wouldn't withstand challenge, since that is a common and accepted business law practice. So go talk to a lawyer BEFORE you even think about signing any contract mod they give you, I think we can both agree on that. And my overriding point is that if you can use their break of the contract to take possession of your boat back, you absolutely should

I’m no lawyer either, but do you realize you’re skewing it right out of the box by stipulating gross negligence don’t you, just about by definition if you are found or be grossly negligent, your screwed, and should be.
Very, very often the signed waiver works cause it does often have an effect in a jury trial and or may influence whether or not another lawyer will take the case, very often these are personal injury type of cases and the lawyer really wants to get the most money they can for the least amount of work and that means settling, not a jury trial in most cases.

I can tell you of a case many years ago where a wealthy person in Tx bought a Bell 206 helicopter, received training at Bell helicopter and signed at least twice that he understood that the 20 min fuel warning light indicates a low fuel level only and that there may not be 20 min of fuel remaining etc, took a written test that he passed where he answered that it was a low fuel indication only, additionally there was a large warning in the POH stating the same. POH is pilot operating handbook.
On the way home he got into bad weather and ran out of fuel, did not autorotate and crashed and died, the Widow sued and reportedly won millions based on the crash occurred less than 20 min after he reported the fuel light on to Air Traffic Control.
So he was grossly negligent by not performing the correct emergency procedure, flying a VFR aircraft into IFR and many other things, there was no way of knowing how long the light was really on, etc etc.

However the jury when they looked at the grieving Widow and was told she would now live in poverty as she had no way of making a living, they would lose the house and no one would send little Johnny to College etc., awarded a large amount of money to her.

The 20 min fuel light was a Military requirement way back when and Bell helicopters were Military derived.

Point being that if it goes to a jury, pretty much anything is possible.

However having to litigate in a foreign Country pretty much means you screwed, unless you have deep pockets and want it really bad.
I would be surprised if the fine print didn’t also require arbitration and you signed away your right to sue. That’s another clause I would put in there, and if I know to, then surely they do too.

[comesatime]

Is the same happening with Moorings?

Counter-party risk was one of the reasons I decided not to get into one of these charter programs.

A lot will depend on how things shape up for upcoming peak seasons, summer in Med, Winter in the Caribbean.

After the big financial hit the charter companies took from Irma, this could be a death blow if Coronavirus pops up again this Winter which is what medical experts are predicting now.

Tough times ahead...

[svlamorocha]

Originally Posted by comesatime

Is the same happening with Moorings?
.

I have not heard anything from Moorings. Have I missed anything?

[redneckrob]

Originally Posted by a64pilot

I’m no lawyer either, but do you realize you’re skewing it right out of the box by stipulating gross negligence don’t you, just about by definition if you are found or be grossly negligent, your screwed, and should be.
Very, very often the signed waiver works cause it does often have an effect in a jury trial and or may influence whether or not another lawyer will take the case, very often these are personal injury type of cases and the lawyer really wants to get the most money they can for the least amount of work and that means settling, not a jury trial in most cases.

I can tell you of a case many years ago where a wealthy person in Tx bought a Bell 206 helicopter, received training at Bell helicopter and signed at least twice that he understood that the 20 min fuel warning light indicates a low fuel level only and that there may not be 20 min of fuel remaining etc, took a written test that he passed where he answered that it was a low fuel indication only, additionally there was a large warning in the POH stating the same. POH is pilot operating handbook.
On the way home he got into bad weather and ran out of fuel, did not autorotate and crashed and died, the Widow sued and reportedly won millions based on the crash occurred less than 20 min after he reported the fuel light on to Air Traffic Control.
So he was grossly negligent by not performing the correct emergency procedure, flying a VFR aircraft into IFR and many other things, there was no way of knowing how long the light was really on, etc etc.

However the jury when they looked at the grieving Widow and was told she would now live in poverty as she had no way of making a living, they would lose the house and no one would send little Johnny to College etc., awarded a large amount of money to her.

The 20 min fuel light was a Military requirement way back when and Bell helicopters were Military derived.

Point being that if it goes to a jury, pretty much anything is possible.

However having to litigate in a foreign Country pretty much means you screwed, unless you have deep pockets and want it really bad.
I would be surprised if the fine print didn’t also require arbitration and you signed away your right to sue. That’s another clause I would put in there, and if I know to, then surely they do too.

I spent 20 years as a professional helicopter pilot same as you, so no need to explain fuel lights to me, thanks. But what this has to do with strict liability or the fact that companies routinely make up legal sounding stuff that they know won't withstand a court challenge, which was my entire and only point, I have no idea? In fact, your story is actually a perfect example of the concept of strict liability, so thanks for making my point stronger....I guess.

I think we're all in violent agreement here:
1. Talk to a lawyer and trust nothing the company says as accurate, legal, or enforceable until your lawyer agrees.
2. Go get physical possession of your boat by any means possible as soon as possible.
3. When the 20 minute fuel light comes on, land as soon as practicable!

[bstreep]

The OP hasn't posted since post #3...