Monday, January 19, 2009

Luxury Yacht Sales Hit The Rocks

Ferretti, the world's second-largest yacht maker, is preparing for the worst after sales of its $2m-plus yachts to the super rich hit the rocks amid the deepening financial crisis.

In an alarmingly fast reversal of fortunes for Ferretti, which has a star-studded client list including Brigitte Bardot, Richard Burton, and Jennifer Lopez, its UK-based private equity owners are in talks to hire advisers for a debt restructuring.

The surprise move comes only a few months after Candover, which acquired Ferretti for $2.3 billion in October 2007, ditched a planned flotation of the Italian-based company on the Milan stock exchange due to the turmoil in financial markets.

Until a few months ago, sales were booming and profits hitting record levels at Ferretti, which specialises in luxury motor yachts costing $2m on average. Its owners are now bracing themselves for a sharp downturn.

Candover is in discussions with Rothschild to advise on a planned restructuring of Ferretti's $950m-plus debts. Candover, Ferretti and Rothschild declined to comment.

The drop in the $11bn-a-year super yacht market mirrors the end of a six-year boom in the art market, where prices dropped suddenly in the second half of 2008. As the world's multi-millionaires lick their wounds, many are pulling back from buying luxury items.

The resulting drop in demand is bad news for Ferretti, which owns the Pershing, Riva and CRN brands, and rival yacht-makers such as Princess, Sunseeker, Rodriguez and Sealine.

"It was a really quiet autumn and the credit crunch had a severe effect," said Simon Goldsworthy, a super yacht broker at Camper & Nicholsons in London. "The smaller the size of yacht, the more it has been affected."

"The most common call I am getting at the moment is 'have you got any repossessions?'" said Mr Goldsworthy. "But there have been more cancelled orders than repossessions, because it is easier to walk away than to default." Ferretti is seeking a chief executive after Vincenzo Cannatelli stepped down in December.

The company was started in 1968 by Norbert Ferretti, the chairman, who retains a big minority stake. It builds about 500 boats a year.

Copyright The Financial Times Limited 2009

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