Repossession of the M/Y NATITA by Goldman Sachs shows how hard private banks work to avoid taking yachts back
This month’s widely reported repossession of the M/Y Natita by Goldman Sachs demonstrates how hard private banks work to avoid taking yachts back.
The biggest reason that private banks finance yachts, jets or art is defensive. They offer it as a low margin product because they do not want to lose good clients to other banks, rather than as a way of making money. Margins are low because, as well as competing with other banks, they are also competing with their clients’ own cash. Private banks also use yacht finance as a way of targeting new clients.
William Kallop, an oil entrepreneur, was clearly an important client for Goldman Sachs, an occasional yacht lender, in 2014. Goldman lent $32 million to AVD Limited, a Cayman special purpose vehicle, to acquire the Natita and another vessel. The loan was guaranteed by both Kallop and his company Offshore Exploration and Production. The original 22-month loan was due to mature in December 2016.
One year after signing, Goldman agreed to restructure the loan. It then negotiated a new agreement in March 2017. It then gave Kallop another three months meet these conditions before asking for the yacht to be seized. Rybovich Boat is also owed mooring fees and three crew members say they are owed salaries.
“Private banks do not rush in when a client misses a payment. You are always looking for a way to work with the client to find a solution,” says the head of yacht finance at one of the world’s largest private banks. “The last thing you want to do is repossess the yacht.”
In March, Natita was listed for sale at $39.9 million – above the $28.4 million plus expenses that Goldman says it is still owed. But buyers will be looking for discounts.
The banker adds: “As soon as the market knows that a bank is the seller, you know that everyone is going to discount any offer. It is a tough place to be.”
10 February, 2014 – Goldman Sachs lends $32 million to AVD Limited, a Cayman Islands SPV, to buy M/Y Natita.
9 March, 2016 – Goldman Sachs and AVID agree an amended loan
30 November, 2016 – Goldman Sachs says that AVID is in default
9 March, 2017 – Goldman and AVID sign an agreement where AVIC will provide additional cash
2 June, 2017 – Goldman says that AVID has not met any of the new conditions and issues a demand for payment with a deadline of June 9
9 June, 2017 – Deadline for payment passes
12 June, 2017 – Goldman issues a formal “Notice of Additional Payment.”
7 July, 2017 – Goldman says that AVID owes $28.4 million on this date. It is also asking for lawyers’ fees, repossession costs and expenses.
15 July, 2017 – National Maritime Services arrests the yacht where it is moored in West Palm Beach, Florida
• Goldman Sachs: Patrick Novak, Seth Harris – Horr, Novak & Skipp
• Rybovich Boat: Farris Martin – Stoup & Martin
• NATITA, AVID, William Kallop and Offshore Exploration: Clay Naughton – Moore & Co
• Crew: Seth Harris, Fertig & Gramling