Discovery shipyard financial trouble - what can those of us in build do?

[pwhatley]

Hi Shimari. I am in the same boat as you (no pun intended). Discovery is building one of the S42's for me. I have retained an UK attorney to support my interests. I'm hoping they find an investor to help rescue the shipyard. I visited the shipyard in early December and felt like they were on the right path for many reasons. The S42 would have been a big hit once they got one completed for the world to see.

[GordMay]

Greetings and welcome aboard the CF, pwhatley.

[Dockhead]

Expensive, high-end boat builders are not immune from either quality problems, or financial problems.



So you should always:


1. Hire a good surveyor to supervise the build.



and


2. Carefully consider the risks of paying deposits and progress payments which are not in escrow.


Anders above is right that with the company just in administration so far, his money isn't lost yet and might never be. Discovery has a good brand and apparently a good order book and there is a lot of financing available right now.


I have just been helping my friend buy a Discovery 67 and the very thorough survey revealed a few problems with the original build, including most notably a bulkhead which wasn't tabbed into the deck at all, contrary to the design.



High end cruising boats like these, Oysters, Swans, etc. are all well designed from a structural point of view, but when they are hand built like these are there are a lot of things which can go wrong. Close supervision of the build is essential.


Concerning the lawsuit against Discovery -- I have to say I am sympathetic to the company. Who buys a million dollar boat without supervising the build, then jumps in and heads straight off across the Atlantic? Then for relatively minor problems sues and wins a couple of million dollars. These builders should REQUIRE owners to engage their own surveyors, and insist that buyers accept the boats only after they have been thoroughly surveyed and punchlist agreed, and should strongly advise them not to cross oceans without a proper shakedown first.

[shimari]

Originally Posted by Dockhead

Expensive, high-end boat builders are not immune from either quality problems, or financial problems.



So you should always:


1. Hire a good surveyor to supervise the build.



and


2. Carefully consider the risks of paying deposits and progress payments which are not in escrow.

...

Totally agree on both counts. I was in negotiations with Duncan Saunders of Saunders, Morgan, Harris to supervise the build. Even though I never signed a contract, he's being incredibly helpful.

As for #2, I accepted the risks. Just you always hope it never happens.

[shimari]

Originally Posted by pwhatley

Hi Shimari. I am in the same boat as you (no pun intended). Discovery is building one of the S42's for me. I have retained an UK attorney to support my interests. I'm hoping they find an investor to help rescue the shipyard. I visited the shipyard in early December and felt like they were on the right path for many reasons. The S42 would have been a big hit once they got one completed for the world to see.

Totally agree the S42 would be successful. The design team was awesome and responsive to my tweak requests. Fingers crossed.

[Cadence]

Originally Posted by shimari

https://marineindustrynews.co.uk/dis...ses-investors/

One of the risks of buying a new boat that you hope never happens to you. I actually tried to get insurance for this situation, but had no luck finding it. That should have been a warning.

Unfortunately for me, they had just started prepping for laying the hull and asked for the stage payment prior. I likely own an expensive bag of unlaid fiberglass- if that.

I am in the process of engaging a UK attorney, but I'm curious to hear from anyone here on the forum or privately that has been through a similar experience.

Thanks!

You have engaged an attorney, I would leave it at that.

[Pete7]

Originally Posted by shimari

Totally agree on both counts. I was in negotiations with Duncan Saunders of Saunders, Morgan, Harris to supervise the build.

A friend and good chap. Did our surveys on two boats including obtaining a commercial ticket on one for charter work.

Pete

[Pete376]

It will depend on where your build has got to and just what action the company has taken. An administrator has wide powers to continue to run the company. A boat that’s nearing completion may well be worth his while finishing with the original workforce. Conversely one that hasn’t been started will almost certainly not be worth his while continuing with.
However, even if no investor is forthcoming the moulds may get sold in which case the new owner would no doubt be very happy to undertake the build for you, but probably not at the price you originally agreed!
The most difficult is always a part-built boat. Depending on the contract you signed you may well have good title to the work that’s been done, in which case you would have the option of trying to find another yard to finish the project if you were unable to reach agreement with the administrator, but that’s always tricky as you would need access to the original design drawings CAD files etc.
The other potential roadblock is that this is the third time (I think) in recent history that Southerly will have appointed Administrators and each time suppliers are likely to have lost out. They may be reluctant to be very supportive, on the other hand they may want/need the business.
All in all sounds a bit of a mess!!
Good luck and I hope you do eventually get your boat

[shimari]

Originally Posted by Pete7

A friend and good chap. Did our surveys on two boats including obtaining a commercial ticket on one for charter work.

Pete

Totally agree Pete. I found him based on your post here.

[Pete376]

Its not yet clear that a receiver/administrator has been appointed, certainly nothing has yet been publicly filed, and apart from the slightly bizarre post nothing from the Company. Though a formal demand for the repayment of its loan by the German company would inevitably trigger such an event under the terms of the security it holds.
Probably still a case of watch this space

[Bathdave]

As some of you know, Discovery bought the moulds and brand of Southerly yachts in 2017, and the southerly models in the Discovery range seemed to be selling well..which makes the saga particularly sad

Southerly themselves went bust two or even three times, but I think managed to deliver yachts in build the last time in 2014. corners were cut and build quality suffered, but I believe all were delivered…it was suppliers who in the main got burnt

Shortly after buying the Southerly mould and brand, Discovery raised quite a lot of money in a crowd funding, and were making very positive noises about the future with the southerly models and their order book, and then did a further rights issue in 2019.

The court case already referred to killed that off…interestingly the pending court case does not seem to have been mentioned in the crowdfunding prospectus, and that hit shortly afterwards.

Discovery didn’t even turn up in the court to defend their case as far as I can tell. I though the judgement amount was a bit extreme, as there was still a fixable boat at play here that could have been fully repaired for for less than the judgement amount

So they went in a receivership in December 2019 and a (German?) investor pumped some money in and all appeared hunky dory.

They have a number of new models and a catamaran and strong order book.

It seems that the majority shareholder ‘withdrew financial support’ which I read as refused to more money in.

To me, that would indicate that either

- despite the strong orders, they have over extended themselves (funding development of too many different models perhaps?)

- there’s another unexpected liability popped up- perhaps another claim for a faulty boat?

It’s all gone very quiet after a press announcement on 15 Dec, so I guess it’s to be hoped there may be another investor in talks

I love both Southerly and Discovery boats, and am really sad that both brands keep teetering on the edge.

Despite being seriously expensive boats, they are obviously small margins when they are built by hand in the U.K.

Fingers crossed for the two people in the thread who have orders in hand, I do hope the boats do keep being built

[BoomerTC]

Following...

My wife and I were headed to Boot in January (if they still have it) to talk to Discovery about getting a build slot.

We're definitely interested in being part of a solution.

[blazing928]

Seems to my mind….[hahha] like a mast collar leak and a fitting aren’t big issues. So either the owner was litigious or the yard ignored him…Considering Lagoon bulk heads and other company’s…anyway, if they have 48 orders, then there are lots who reckon its a good boat, so id say it could easily charge some more to make it profitable.
Distant Shores [I think] rave abut theirs, look like great boats

[Paul Reading]

UK insolvency law is not very favourable to creditors. Don't spend too much on lawyers as you have very few rights. Your best hope is that a new investor will take over and finish the boats in build in order to show the company is sound because failure to do so may impact future orders.

When Oyster went but there was a bun fight to acquire it and the new investor had both deep pockets but also seems to have taken the yard in a very profitable direction, it is quite possible that the same thing is happening with Discovery. Discovery is building small boats and a lot of different designs, I cannot help but think this has just made the company loss making. I had a long talk with Oyster a few years ago when we were trying to buy a second hand 47. They only made a small number of them and I didn't know this at the time. There were none on the market so we bought a Discovery 55 instead. What we were told was that Oyster only had two sheds and they could either build 575's or 475's as they had a full order book for 575's they were simply refusing orders for 475's because it made no financial sense to make them.

The original model for this strategy came from Colin Chapman who saved Lotus cars by abandoning his roots of small fast fun to drive cars, Elans, Sevens and Europas, all were selling well but profit per car was tiny. He dropped the whole range and went up market and launched the futuristic Lotus Esprit as seen in both James Bond and later in Basic Instinct. At the time Lotus fans were dismayed but as the world went into a spiral of inflation and bankruptcies he was hailed for this decision. Oyster have in effect done the same. Discovery have headed in the opposite direction.

When Sadler Yachts went bust in the UK the boats in build that could be identified as being owned by purchasers were allowed to be removed and finished elsewhere by another boat builder. Sadler's went bust because they took lost of advanced orders at a time when raw materials suddenly went through the roof and before long the builder was loosing money on every boat finished. He did not have a contract that allowed him to either return deposits or increase the price to purchasers.

I own a Discovery and I think that they are great sailing boats, they are designed better for sailing than Oysters. I think that Oysters are better built, but lack cupboard space, they are very much a boat that looks nice inside, but I prefer to be higher up so that I can see out of the windows.

[tcasey56]

Ahoy Shimari,

I know what you are going through. I suffered through the Pacific Seacraft bankruptcy and subsequent liquidation. I would be happy to sit down over a beer or coffee with you and discuss my experience since it looks like we are both in Annapolis. Drop me an email at tcasey56@me.com with your contact information and I will get back to you.