Luxury Yacht Make Ferretti Facing Financial Problems

Ferretti SpA, the Italian yachtmaker may get a 90 million-euro ($114 million) cash injection from its managers and Mediobanca SpA as creditors take control. Mediobanca will gain a stake of about 10% in the maker of Riva and Bertram yachts in return for an investment of as much as E20 million, while managers led by founder Norberto Ferretti will invest about E70 million in fresh capital for about 40% of the company, two of the people said. A group of more than 100 creditors led by Royal Bank of Scotland Group Plc, which went broke itself last year, will convert some debt to equity, leaving them with about 50% of the Forli, Italy-based company. And if your maths is as good as mine – 10+40+50=100%, meaning the company is flat broke.

Ferretti, which had been planning to sell shares to the public before the financial crisis eroded demand for luxury yachts, missed payments last month on some of the 1.3 billion euros of loans used to fund its buyout by Candover Investments Plc in 2006. The buyout firm will write off its investment.

“Ferretti’s problem is one of liquidity, not of profitability,” said Georgios Kyriazakos, who runs Ferretti’s US operation, which is rather entertaining considering Ferretti is completely bust. He went on to joke, “there’s been a pick-up in business since January.” Really? Not what I am seeing and I know a few yacht charter companies who will be keen to know about this pick up in business.

The plan hasn’t been approved by all lenders yet, according to one of the people. Officials for the company, Mediobanca and Royal Bank of Scotland declined to comment. Permira Advisers LLP, which sold Ferretti to Candover, will also lose its remaining holding.

Founder Norberto Ferretti would become Ferretti’s biggest shareholder under the plan, with a stake of about 25 percent in the company, according to one of the people. Ferretti’s debt will fall to about 560 million euros, said the person.

Candover said last week it was in talks to cut the size of its 3 billion-euro ($3.8 billion) private equity fund amid a dearth of leveraged buyouts. Candover Investments will report earnings March 2.