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Buyers Trapped in Feud with Sunseeker...

Discussion in 'Sunseeker Yacht' started by YachtForums, Jul 29, 2019.

  1. bayoubud

    bayoubud Senior Member

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    Or as ob suggested, make payments direct to the mfg'r. Maybe new boat buyer's will take notice, don't let the middle man handle the money on new build.
  2. RER

    RER Senior Member

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    Sunseeker looks bad in this. By all accounts they refused to deliver a boat that the buyer claims he has paid the dealer for, and in the mean time they displayed it at the FLIBS. The boat show participation could have been in the contract and they still own it but Sunseeker still looks bad. If the buyer met the terms of the sales agreement in full and it's the same agreement used by Obey and Sunseeker on previous boats then isn't Sunseeker's complaint with Obey? As mentioned in previous posts if there was a trade-in that could complicate this scenario.

    I suspect that Obey is "judgement proof" as in there's no assets to go after once the boat is delivered so Sunseeker has held onto it. I'm assuming it's not Obey that's keeping the boat from being delivered.

    I don't recall reading anywhere how much money is actually in dispute. I suspect Sunseeker has been paid for most of the contract since the boat was launched and shipped. If the buyer fulfilled his end of the deal why would't Sunseeker suck it up and release the boat if not just to avoid the bad PR? A future deal could be structured to avoid this but that's not going to help this time.
    Last edited: Nov 6, 2019
  3. Oscarvan

    Oscarvan Senior Member

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    That's a big suck up. Easy for you to spend their money. We can't look at their balance sheet.
  4. RER

    RER Senior Member

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    Companies make those kinds of decisions all the time.
  5. Beau

    Beau Senior Member

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    Interesting, how would a letter of credit helped here? Payment conditioned on the actually delivery of the vessel to the purchaser?
  6. Scott W

    Scott W Senior Member

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    Yes, that's exactly it. Throughout the build process, milestones can be established that trigger when specified funds are released to the builder with final payment withheld until delivery. Custom yachts are almost always built this way.
  7. bliss

    bliss Senior Member

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    "Follow the money". My bet is ultimately the money is only partially recoverable. The process that leads to full or almost full discovery will continue for some time. One of the questions that I keep thinking about is "Was Obey conducting business as an agent of Sunseeker?" If so, by what definition? An agency contract between Obey and Sunseeker or a determination made by a judge. If a judge, whose court ? The Brits? Our feds? FL? CA? or ????? I have no knowledge of this saga - just reading what to me, is a cautionary tale.
  8. RER

    RER Senior Member

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    I went back and read the article again from July 29th and refreshed my memory on the details. There are a lot of moving parts including a trade-in on this boat, other boats sold by Obey, and another hand-full of spec boats ordered by Obey - which they paid some money towards but will never take delivery of. If you look at the $12 million or so in dispute, affecting about 12 boats according to the article, that amount represents probably about 25% of the total value of the 12 boats. That's a generalization. Anyway, the arrested boat isn't going to change hands now until a court orders it so - or not.
    Last edited: Nov 6, 2019
  9. Scott W

    Scott W Senior Member

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    I don't disagree. To the casual observer, Sunseeker is taking a hit. BUT honestly, in other industries that employ a dealer model, this kind of thing is not unheard of. It happens with car dealerships (in terms of lost earnest money deposits because of insolvency or fraud) more frequently than you might imagine and almost never (never, really) does the manufacturer interject itself into the process to make the consumer whole. Of course, there are more consumer protections for the buyers of autos than there are for boat buyers. And honestly, one of the reasons any manufacturer has a dealer network is to insulate themselves from the consumers transaction so hesitancy to intercede is understandable and predictable, frankly. It's hard to imagine any production boat company eating $4M just to avoid some bad press.

    This is such an incredibly weird situation where someone has paid a dealer a handsome 7-figure number essentially for the promise of a boat delivery. As I mentioned earlier in the thread, in the boat industry (in most states) that's a dangerous business decision because boat dealers only have to be bonded for a surprisingly small amount of escrow (I think it's around $30K). So, if you give a boat dealer $4M and that boat dealer goes belly-up before delivery of the yacht, your escrow is only insured for $30K and the rest you'll have to settle with the bankruptcy court like any other vendor. Maybe you're treated as a secured creditor but maybe you're not. I'm not sure how the law in FL treats the buyer in this situation.
  10. Scott W

    Scott W Senior Member

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    The dealership contract between Sunseeker and Obey almost certainly has a choice of law provision. I would only be guessing, but I'd wager country specified in that contract is the UK. So, it would essentially be a US federal judge applying British law to this contract, something that happens with surprising frequency in international contract litigation. There's also a chance that a choice of law provision exists in the contract between the dealer (Obey) and the consumer. This is not uncommon not only for the sale of the boat but for warranty disputes as well.
  11. RER

    RER Senior Member

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    I don't think the entire purchase price is in dispute. There's some commingled issues in that $12 million.
  12. olderboater

    olderboater Senior Member

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    Don't be too quick to assume who is doing what to whom. We may only be seeing a very small part of the total situation. In fact, the first thing we read said that there were at least six boats involved. In fact, there were apparently 12 boats Obey ordered as spec boats for inventory. In this case, the buyer was not even known to Sunseeker. We have no idea how many people have purchased new or used and may lack clear title. What about the suit by American Marine Publishing against Obey or the one by Imokaye. There is even a history of legal battles back to the time of Atlantic Yacht and Ship, which Obey was a partner in.

    Also, Obey claims his problems were a result of Sunseeker illegally terminating their agreement with him. Now, we know nothing about that but ask yourself if they terminated the agreement in March with no reason for doing so or what they were concerned about at that time.

    Still if I was Sunseeker I'd be doing all I could to get the person a boat. However, I suspect that among the boats involved there are many entanglements over legal ownership at this point with some having been transferred to Obey, some to customers and some still held by Sunseeker. Then you have the complication of multiple legal entities in the US and in the UK. These cases get quite complex. Sunseeker may have even encouraged the buyer to have the boat arrested. As Capt J said in post #13, tip of the Iceberg kind of thing.

    Also, as to "Judgment Proof." I assume from a civil standpoint they are. This isn't the first or only recent litigation against them. However, there could be potential criminal charges involved if those things alleged are true.

    Now, having focused on Obey, what about Sunseeker. What is their financial situation and what is their legal situation. Financial first. Well, it may not be strong enough to handle this situation better and to release the boat and others. Their profit was around $1.4 million in 2017 and $8.4 in 2018. Cash wise, this is offset by tremendous capital expenditures. As of December 31, their Assets were $86 million less than their liabilities. Cash in the bank at that time was $15 million. In the scope of large manufacturing companies, they're still a small company even though very large by industry standards with sales around $380 million per year. The point is that the money at stake on this situation may very well be more than their entire annual profits. It may be money they don't have and that they'd have to borrow. As we talk buying direct, that's only as safe as the company is and very few boat builders are really that safe. Who knows if Wanda (owners) wants to put more money in Sunseeker. Buyers either need to be able to sustain the losses or use LC's or insure their purchases or take other actions. It's sad that after several years of consistent growth, the industry of Yacht Building is still not a strong industry. Builders are highly leveraged and one downturn could put many of them at risk. The money in question in the Sunseeker vs Obey situation is greater than the annual profits of Sunseeker in their best year under current ownership.

    Perhaps their management can't or doesn't have the authority to resolve this. Political conflict even plays a role. Wanda has tremendous foreign investment including AMC theaters in the US. Roughly two years ago, the Chinese government restricted the state owned banks from making loans to private Chinese firms as they wanted to limit their foreign investment. Wanda sold over $10 billion of assets in 2017 and 2018 as a result.

    While I still criticize Sunseeker's handling of this, perhaps they just simply can't afford to do better. That would be a sad commentary. However, there is no evidence in the case of the arrested boat that Sunseeker has done anything wrong. They sold a boat to Obey, who they feel hasn't paid, so they haven't turned it over to them. By all that is apparent, Obey no longer is in business. Sunseeker may not legally be able to turn the boat over to the end buyer. In fact, if they released it to Obey does it then just get involved in a bankruptcy? Has Sunseeker then compromised the creditors? Sunseeker would have to re-establish ownership of the boat and then how do they apply money and a trade paid to Obey? If you go to an auto dealership and order a car and pay today and they go out of business tonight, the manufacturer doesn't give you a car. Your arrangement was with the dealer and you're now a creditor. My point is that it looks bad for Sunseeker, but at this point, their hands may well be tied.

    I don't fault the buyers at all when you're buying from one of the largest builders in the world through their largest dealer. Inherently, that should be safe. I will add one other word of caution for buyers. Many trade in boats, even yachts. In so doing, you're always paying less money than the dealer must pay to the builder. The dealer may have the ability to handle that. More often, the dealer may need to sell trade in A to pay for purchase B and trade in B to pay for C. A legitimate business strategy can quickly become a Ponzi scheme. This has happened over and over with dealers and brokerages. Obey and Sunseeker is just one more, albeit major, example.

    This is another sad reflection on the industry. It's Obey and Sunseeker today but could be any number of dealers and builders in the future. Just use the best lawyers you can before making the deal so you don't need them at this point. It's scary ordering a new boat in this price range. Even with the best research, you know so little about the people you're dealing with and you're always asked to pay most of the price long before delivery. This issue is far greater than Obey and Sunseeker.
  13. Yachtguymke

    Yachtguymke Senior Member

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    I'd agree that terminating your dealer agreement with your largest distributor is rare but when you've got someone with deeper pockets, a publicly traded company offering to buy more volume than what your current distributor buys, greed sets in. Don't take everything in that article as fact. There is a ton more to this story...
  14. olderboater

    olderboater Senior Member

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    I won't argue with you for a moment that there's a ton more to the story. I'm sure plenty of blame to go around to all parties and lawsuits that may take years to resolve.
  15. RER

    RER Senior Member

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    And tying up a new boat that the client claims he has already paid for. As you said Sunseeker may not have the financial solvency to have done anything about it even if they wanted to. Now it's up to the courts.

    So among 12 boats and $12 million dollars in dispute between dealer and builder in this mess, you have one guy who has his (allegedly paid for) boat held hostage. That's going to hurt Sunseeker.

    Even if Obey is the cause, and I don't know if they are, but even if they are I believe this is going to keep a significant number of buyers from going into contract with other Sunseeker dealers. The caveat would be there is a percentage of buyers hell bent on Sunseeker and that's what they are going to buy or they are not buying a boat. So they will be buying probably no matter what.
  16. Oscarvan

    Oscarvan Senior Member

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    Lots and lots of billable hours. I should have listened to my mother and gone to law school.
  17. bayoubud

    bayoubud Senior Member

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    A lawyered up situation. The buyer says he paid the progress payments, Obey had an obligation to forward funds to Sunseeker. Sunseekers is saying they did not receive funds and holding the boat from delivery. Why Sunseeker did not notice the buyer for non payment is surprising (or did they?). Rumors Obey is no more? Can it get any worse? Probably! RER is right, this will likely affect contracts on Sunseekers and others, plus another negative image for the industry. Hope the buyer gets his boat….
  18. olderboater

    olderboater Senior Member

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    Obey has quickly blacked out Rick Obey and Associates and slid over to Rick Obey Yacht Sales. Rick Obey and Associates is a fictitious name of Marine Consulting Associates, Inc. and Rick Obey Yacht Sales is of Specialized Nautical Services, Inc. It's fictitious name filing was made on July 9. The corporation was formed on June 18. So, all as part of this.

    Now, here's what may well be the sad reality for the buyers. Rick Obey and Associates may be judgment proof at this point. Sunseeker may be entirely clear as not a party to the transaction and as owner of the boats, having received partial payment from Obey. Obey chose not to pay more to try to offset amounts he claimed they owed him. Problem is all he felt he was owed was business costs, while he owed Sunseeker for Collateralized and Titled assets. This could drag on for a long, long time. The buyers may be in the same shape as the boaters who shipped via Yacht Path. They'd paid YP, but YP hadn't paid the ships. If they wanted their boats, then they had to pay the ships.

    If you're Sunseeker, how much would you spend or pay or lose to protect your reputation? Would you go to $12 or $13 million? As a British company owned by a Chinese company would you? That's more money that they make in two years.

    First test will be does the arrest of the boat hold up. Will Sunseeker go along with it or will they claim it's their boat and they haven't been paid and Obey sold a boat to the buyer that Obey didn't own.

    Another question is knowing all this and knowing there is a possibility Sunseeker did wrong or a possibility they did nothing wrong, would you buy one? As a former owner of a Manhattan 65 and prospective buyer of a Manhattan 66 for our next loop trip, I can say that although out planned purchase is still a year or two out, we're looking harder at alternatives. I would not today buy one until I see all this untangled.
  19. Alzira II

    Alzira II Member

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    I have been retailing boats for a long time. The comments above about a weak Marine industry can be pretty spot on. The way I see it when a customer writes me a check that is between me and them. If I can’t produce the boat on time, right color, right motor, free of defect for delivery that is my problem not the manufacturers as far as the customer is concerned. Unfortunately the balance sheet of most marine retailers is nonexistent, the glitz and glamor of a fancy boat show booth doesn’t get you very far when you have to pony up a refund especially when a trade may be involved. The ordering process for these uk yachts usually involves some pretty detailed stage payments in my experience. I doubt this boat was shipped stateside with any intention of being a sold boat as far as sunseeker was concerned.
  20. Yachtguymke

    Yachtguymke Senior Member

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    All of the interaction between Obey and Sunseeker is publicly accessible. One of the good reads is about 219 pages long.