Fairline in trouble

I'm very loosely following this because just before Fairline was "sold" (sort-of) to Wessex Bristol, I happened to have read through two epic boat in build threads on another web site.

(The same owner was responsible for both threads - he had one Fairline Squadron 78 heavily customized, and then a couple years later sold the first and had another one even more customized. I'm not going to link to that other site, but you can google "boat in build fairline 78" to find them.)

Anyway, just as I finished reading those two threads, the news about Fairline being sold came out and it's been heavily discussed on that same site. Since various articles keep getting reposted here, I thought I'd type up my own summary:

On 29 Sep 2015 - Better Capital PCC Ltd sold its share of Fairline to the Wessex Bristol group of companies for a "modest deferred consideration".

Very shortly, i.e. 2 Oct 2015, there were articles about 109 employees (quoted as 1/3 of the production workforce, with 450-odd total employees) being temporarily laid off.

Not much substantial news since then, until now.

Now all the articles are saying that Better Capital wasn't happy with how things were going (they say Wessex wasn't doing enough to turn the company around, not injecting new money), so they called in administrators (liquidators). Wessex, on the other hand, says they had a plan in place, everything was on the path to turn the business around... There are articles claiming that various groups of employees either haven't been paid or at least haven't had contributions paid to their pension plans. The saving grace for owners is that various dealers have said they'll be honouring any warranty claims.

If you want it, lots of discussion and speculation on the site with the epic build threads.

None of it passes the sniff test to me. I think Wessex had this as at least A plan if not THE plan when they made the acquisition. You buy for deferred consideration. That's more like I'll take it off your hands and if I'm able to someone make a little I'll pay you a little. Not a commitment by any means. The company then still doesn't have the capital needed to move forward or anyone willing to put it in.

If as the buyer you're able to use bankruptcy to eliminate much of the debt, then somehow find a buyer for what is left, you do so. This is what you often see with investment companies. There are people and companies in the US that have made their fortunes by buying and bankrupting companies. Scavenging. Now Wessex is a bit different in that they do own another boat building company, in Fletcher. They acquired Fletcher after bankruptcy. Downsized, turned it into a "boutique" builder rather than volume. Translation, very small. I think the plan is really to try to end up with Fairline for pennies on the dollar (ok, pence on the pound) and then see if it can be a boutique builder or can be sold. Ultimately they'll end up with just the pieces they want at the price they want to pay.

Investments are made in businesses for two reasons. One is to infuse more funds and build the brand. One is to not put money in and to strip things down. I am afraid Fairline's days of true relevance in the market place are over unless the right buyer walks along now interested in it for a minimal price. The owners of there British peer companies, Sunseeker and Princess, have the money and seem willing to invest it to continue to build those companies.

This is the world of venture capital and investment firms. Wessex purchases in September, attempted to make arrangements with the creditors in November to reduce the debt and defer payments, and when that didn't work out said the proverbial "well, we will show you then" and administration in December. The only ones I feel bad for are the hard workers who lost their jobs in all this, perhaps don't even have their pensions adequately funded for those who were even vested. But then investments to many are about the numbers and potential gain, not at all about the people and, secondarily, not really about the product.

See also "Sealine Yachts." Oxford Investment. Looking for investor who never came. Administration. Sold for very little to a subsidiary of Aurelius who then shut the plants down and decided to build any future boats in contract manufacturers and sell the property.

heh, that's really close to my area, even while I'm personally too touchy to do this particular kind of stuff (also probably a reason I ain't ordering my own megayacht just yet).
Interesting paradox to understand is, if you "buy" for deferred consideration, which is typically linked to some kind of performance benchmark, investing straight into the company (e.g. without bankrupcy or other shenanigans) is practically investing into future payments due. Fund manager's duty to his principals is not to do such loosing moves.
Besides, "real" turnaround require capital, real world strategy/management skills, and is still quite risky. A salvage operation is fairly simple, algorithmic and predictable task with the added benefit of staying confined to the documented financial side.

So, as usual, agree with olderboater: this most definitely was THE plan.

A bit of an update. This from Yachting & Boating World...

Fairline makes boat show comeback in Miami

Fairline is making its official public comeback in Miami this weekend, with local broker G Marine representing the brand for the first time since it came out of administration.

A Fairline Targa 53GT and Targa 48 Open will be on display throughout the Yachts Miami Beach Show, one of America’s biggest boat shows which opened today and runs until Monday (February 15).

Miles Moorhouse, marketing manager at Fairline Yachts, said: “South Florida is among the largest leisure boat markets and we are keen to continue the long-term relationship with G Marine in Miami.

“G Marine is one of the crown jewels,” he added. “We appreciate the company’s experience and input as we are focused on developing new and exciting models.”

This is the first boat show appearance for new company Fairline Yachts, which was founded by Russian investors Alexander Volov and Igor Glyanenko when they bought the Oundle yard out of administration last month in a deal believed to be worth £4.5m.

The new owners were quick to name Russell Currie, director of brokerage firm Fairline North Mallorca, as the managing director of Fairline Yachts.

Fairline has recently confirmed plans for its UK comeback, with appearances scheduled for the London On-Water Boat Show and British Motor Yacht Show in May.

Some more information.

http://www.theguardian.com/business...ats-staff-queuing-gates-work-russian-takeover

I found a number of things interesting. First the valuation of the company. £4.5m although another source put the price at £4.1m. Supposedly though the previous sale was at £2 deferred. Who knows the real numbers but certainly not much invested in the company by anyone. It basically says you buy a builder for the price of a small yacht.

Two of three locations closed and employees reduced to 100. Plans to build 30-40 boats in the first year with 100 employees. What? Now they speak of how much more efficient they will be, but that doesn't happen on day one.

Another business of the new owners is Megahertz Ltd.

Interestingly, Fairline had become very dependent previously on Russian customers and one of the reasons given for their collapse was the Russian economy and drying up of that business. So, attracting UK based Russian buyers then is quite logical in that light. It also sounds like their niche has been the Russian market, but also sounds like there was a Russian builder going after that business as well.

They've indicated the line will be significantly stripped down but no information on what it will look like. I'm curious as to what will be said about the line in Miami. As of now the web site still shows the old line.

Must note that they did not buy the company, but the assets, as would typically happen. That meant even the 72 employees kept on through the administration were made redundant and all new employees being hired. Now I imagine that will include most of the 72 and more a matter of formality. Old company closed so everyone must be hired new. It's my understanding boat building did continue throughout although in a very small quantity, but, if so, that's positive. They indicate they will complete all boats on order regardless of how much they lose doing so. As part of what they purchased is work in process I would think they would end up cash positive on any completions so seems a bit disingenuous. Now, I do wonder how the buyers of those boats feel about the entire situation. Completing the boats makes sense if they can as that would be the only work they have until they take new orders.

One huge aspect is missing on which to evaluate this deal. How much money are the new owners putting into the business to maintain and build it. If it's many times what they paid for the assets then there is hope. However, if what they paid in administration represents the majority of the investment, I would say less hope.

The company has been a soap opera for some time. Here's hoping that aspect of it will change now.

The new managing director, Currie, had been a large dealer for Fairline in Mallorca. Also Gilding, former head of Fairline, who left two years ago for Sunseeker is back with them.