Reckoner set to fill ‘screaming gap’ in yacht finance
The Reckoner superyacht team. Clockwise from top left: John Stephens, Bob Atkinson, Martin Kahm, Niklas Nilsson.
He describes it as a “screaming gap” in the market. He’s talking about superyacht finance for new builds in the 30-85m range and John Stephens believes he has a solution.
It is called Reckoner Capital Management, a New York-based private equity-backed investment management firm which has launched a superyacht finance arm alongside its investment, infrastructure and art finance divisions.
“There’s less and less meaningful, proper, deliverable finance available for construction in this area,” Stephens, now MD at Reckoner, tells us. “There’s not enough finance to fill even close to the demand. Clients haven’t got a clear route to market. They need it to be demystified. That’s squarely our raison d’etre.”
Stephens and Bob Atkinson, co-founders of yachting and business jet finance arranger and adviser JB Capital, will lead the Reckoner venture alongside shipping finance veterans Martin Kahm and Niklas Nilsson, co-founders of StarStruck Marine Capital and former senior Nordea bankers.
The quartet will be based in London but will be “agnostic around jurisdiction” and will focus on new builds and refits at the “top 25” shipyards, principally focused on the Netherlands, Italy and Germany.
“Our credit policy will be very much driven by quality,” says Stephens.
Atkinson adds: “It is a seriously growing sector of the industry but what is perhaps holding it back is that there isn’t the finance available.”
Scalable asset-backed finance programme
Reckoner is backed by RedBird Capital which manages more than $14bn in assets across sport, media and entertainment and financial services. It was founded in 2014 by former Goldman Sachs executive Gerry Cardinale, who is the managing partner and chief investment officer. The company provides long-term strategic investments with a 99% stake in Italian football giant AC Milan (bought for €1.2bn in 2022) and has a significant investment in Fenway Sports Group, which owns Liverpool FC and the Boston Red Sox baseball team. RedBird is also an investor in Paramount Skydance Corporation, backer of franchises such as Top Gun and Mission: Impossible.
The opportunity lies in being the “first full, dedicated, scalable asset-backed” financing programme, providing tailored solutions without the need for the borrower to maintain assets under management (AUM) or a prerequisite for refund guarantees from the shipyard, says Stephens.
Finance will be highly collateralised via a construction mortgage which provides progressive title to the increasing value of the vessel as it is built.
“Moreover, we are lending behind substantial owner equity. Before Reckoner advances capital, the owner will typically have funded 30-50% of the build price providing a meaningful collateral cushion from day one,” adds Stephens, who has held senior roles at Barclays, BNP Paribas Fortis and RBS Group.
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He suggests the attraction will be as a specialist lender with “more than 100 years’ experience” combined in yachting and maritime across the team.
“Just having that alternative source of credit will draw in clients who may not have even considered finance, because they just don’t believe that it’s available,” says Stephens. “And the reality is, it really hasn’t been. What we’re putting together is a fully dedicated programme just for this market.
“Our documentation, our credit process and our onboarding will be standardised. We love banks, of course we do. But they’re not focused on this market sector.”
Returns vs risk dynamic
Historically, banks were highly motivated to finance yacht construction. Stephens and Atkinson have structured more than $3bn in superyacht construction loans over their careers.
“Banks weren’t afraid to do it. It made sense for them. It was profitable,” says Stephens. “They managed the risks and away we went. Fast forward to today, really what’s driven the pullback of bank finance in the construction space is regulatory more than anything and their decision to deploy the capital elsewhere.”
Following the 2008 financial crisis, increased regulation through the Basel reforms has forced banks to hold more capital against such loans, making funding the build of a superyacht less attractive to the bank and more restrictive to the buyer. Private credit is slowly filling the gap.
“It is a simple returns-vs-risk dynamic,” says Stephens. “We are confident we can deliver attractive risk-adjusted returns for investors. And we can manage the risk because of the experience that we have as a team.”
Reckoner’s collateral strategy is likely to appeal to shipyards too, which may be hindered by having to allocate much of the working capital from stage payments to support bank-backed refund guarantees to lenders, according to Atkinson, a 30-year finance veteran who led the yacht and aviation business at Barclays.
“For every refund guarantee that the shipyard provides, it’s invariably a bank-backed refund guarantee,” he says. “So there is a cost associated with that for the shipyard and it just defeats the object.”
Best use of liquidity?
The cost of a loan is “undoubtedly” higher than with a bank, but Reckoner believes clients are increasingly focused on the opportunity cost.
Atkinson gives the example of a client borrowing 60% of the build cost from a bank. They will have to pay the first 40% and then perhaps place 30% or more of the vessel cost as investments with the bank. He argues the client is already funding up to 70% of the total before they have started making payments to the shipyard.
“Increasingly, it just doesn’t make sense from a client point of view,” he says. “Unless you are 70 years old, you’ve sold your business for €300-400m, you’re sitting on a pile of cash and you don’t know what else to do with it.”
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Younger buyers with different motivations are also changing the landscape.
“Many younger owners are entrepreneurs with capital tied up in operating businesses and private investments. For them, the question is not simply whether they can pay cash, but whether that is the best use of liquidity and potential crystallisation of tax charges. A well-structured financing solution can preserve flexibility while adding discipline to the build process.”
He adds: “What we’re seeing is that maintaining liquidity is increasingly important for ultra-high-net-worths … They are looking at the opportunity cost of their own capital and how they use it. These are big, sophisticated investments, and invariably, partnering with a finance provider adds a degree of discipline into the build as well.”
It remains to be seen whether that “screaming gap” will be filled by a torrent or a trickle, but Reckoner is in no rush.
“We will do it in a sensible, controlled manner,” says Stephens. “We’re not going to be simply throwing money out of the door. That’s when mistakes are made.”
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