on 28 Sep 2021
Michel Buffat of Credit Suisse on how the new index could reshape the superyacht financing and brokerage market
Last September, Credit Suisse and Yacht Club de Monaco launched the Superyacht Eco Association (SEA) Index, to encourage the yachting industry to put forward solutions to reduce the environmental impact of superyachts. Michel Buffat, head of aviation and yacht finance at Credit Suisse, discussed the new index with Asia-Pacific Boating, and what it could mean for the yacht financing business.
Michel Buffat, head of aviation and yacht finance at Credit Suisse
Can you say a few words about the yacht financing market in Hong Kong and the various markets of Asia-Pacific?
As is widely known, the APAC markets in general are in a much earlier stage than the more mature markets like Russia, Europe and the Middle East. We see, however, growing demand in the Hong Kong area. Financing requests tend to be in the 45-metre to 65-metre range, with some exceptions in the very large yacht segment. There also seems to be some demand in Australia and New Zealand. In other Asian markets we have not observed a lot of activity.
What are the key motivators among buyers for using financing?
There are several reasons why financing can be attractive for a client. First, it must be said that yachts are not cash flow generating, but depreciating assets and the logic for lending in commercial investments will not work. If someone cannot afford to buy a yacht in cash, then they should not finance. Financing is a pure optimisation tool. A very popular use of financing is when an owner has paid cash and now wants to get part of the liquidity back with a loan on the yacht. Financing is mainly a cash optimisation tool.
It may soon be normal that sustainability of yachts will determine commercial terms for various products such as port fees, (and) potentially also for financing
How are issues of sustainability in yachting (build materials, efficiency, emissions reduction, etc.) impacting the yacht financing business?
Sustainability in yachting is rapidly gaining importance. Credit Suisse is a leader in this respect. Since there was previously no measurement system for CO2 emissions that allowed a systematic comparison between yachts, we created, in collaboration with the Yacht Club de Monaco, a new, ground-breaking index, the SEA Index, operated by the non-profit organization Superyacht Eco Association, certified by Lloyd’s Register. We are very optimistic that this will change the way owners look at a yacht when buying. Any player in the industry may create products that reward low carbon emissions. This is measured by the SEA Index. I think it may soon be normal that sustainability of yachts will determine commercial terms for various products such as port fees, (and) potentially also for financing.
Since the launch of the Superyacht Eco Index last September, can you say what the response of the superyacht community has been?
The SEA Index is a tremendous success and demand is great. We do not talk about numbers, but we were positively surprised. So far, we have not focused too much on promoting the SEA Index, but still, it seems to be of great interest for owners. We are in discussion with many builders, who also want to contribute to the further development of the Index by providing feedback.
The more yachts join, the better. Only then can the SEA Index develop its maximum effect. The good thing is that rating a yacht is very easy. Only a few input data are required, and a yacht can be rated. When putting a yacht on the market, this is very convenient. For sure, a good SEA Index rating will help to sell the yacht more quickly.
What are the broader impacts that you and other partners in the Superyacht Eco Index hope to have, apart from rating or measuring superyachts’ emissions?
Rating is only the beginning. We believe only things that can be measured can be improved! This shows exactly how we want to create impact: we want owners to want high-rated yachts and we want other owners to want even better-rated yachts. This in turn will motivate shipyards to build yachts with even less emissions. If our index can start this race to low emissions, we have achieved what we wanted.