Financing a Super-Yacht with a Swiss Lombard Loan: A Simple, Step-by-Step Guide
A Lombard loan is a line of credit secured against your liquid investments—typically cash, bonds, equities, and sometimes funds—held at a Swiss private bank. Instead of selling investments to pay for the yacht (and potentially triggering taxes or missing future market gains), you borrow against the portfolio at a relatively low “Swiss bank rate” (a floating base rate plus a small margin). You then use that cash to buy the yacht outright (or to fund the deposit alongside a marine mortgage). Your portfolio stays invested; the bank just takes a pledge over it as collateral.
Think of it like a high-end “asset-backed overdraft”: flexible, discreet, and fast—provided your assets and documentation are in order.
Why people choose this route
– Preserve your investments: You don’t have to liquidate long-term holdings you like (or ones with embedded gains).
– Potentially low cost of funds: Swiss private banks often offer competitive pricing for well-diversified, high-quality portfolios.
– Speed and discretion: Credit lines can be arranged quickly for qualified clients with established relationships.
– Flexibility: Interest-only, bullet, or revolving structures are common. You repay when it suits your liquidity plan (bonus, asset sale, refinancing, charter income, etc.).
What the bank looks at
Swiss banks determine how much they’ll lend by assigning advance rates to each asset class:
– Cash and short-dated top-quality bonds: high advance rates.
– Investment-grade bonds and diversified bond funds: relatively high.
– Blue-chip equities and equity funds: moderate.
– Concentrated single-stock positions, small caps, illiquid or complex funds: lower or sometimes ineligible.
The bank blends these into a credit limit. For illustration only: a diversified, high-quality portfolio might support a 50–70% credit line; lower for riskier or concentrated holdings. The exact figures depend on the bank, the assets, and market conditions.
The moving pieces, kept simple
1. Open or use your Swiss custody account. Your investments are held at the lending bank or a custodian they accept.
2. Sign a pledge agreement. The bank takes security over the portfolio. You keep ownership and remain invested.
3. Get the credit line. The bank sets a limit in your chosen currency (EUR, CHF, or multi-currency) with clear margin rules.
4. Draw down for the yacht. Funds go to the sale escrow or directly to the yard/broker at closing.
5. Optional: Combine with a marine mortgage on the yacht to reduce the draw on your Lombard line.
6. Service the loan. You pay interest (often quarterly). Principal is repaid on your timetable, subject to the facility terms.
7. Stay within margin. If markets fall and collateral coverage shrinks, you may need to top up or partially repay (a margin call).
Taxes, title and practicalities
– VAT and import: Depending on where the yacht will operate and be flagged, you may owe VAT or use structured solutions for commercial operation. Get specialist advice early.
– Flag, class and mortgage: If a marine mortgage is used, the bank (or marine lender) will register a mortgage over the vessel with the flag state. This can sit alongside the Lombard pledge on your portfolio.
– Insurance: Full hull, machinery, P&I (liability), crew and charter cover (if applicable) are standard lender requirements.
– KYC/AML: Expect thorough source-of-funds checks—routine at Swiss banks.
Examples for a €55 million purchase
Example A: All-cash via Lombard (portfolio large enough)
– Portfolio: €120 million, diversified, conservative.
– Bank advance rate (illustrative): 60%.
– Credit line: €72 million.
– Draw: €55 million for the yacht; €17 million headroom retained.
– Interest cost: Suppose an all-in floating rate of, say, 2.2% per year.
– Annual interest: ~€1.21 million.
– Why this works: You keep the entire portfolio invested; the loan’s cost may be lower than the portfolio’s expected long-term return.
Example B: Split financing (Lombard + marine mortgage)
– Portfolio: €60 million, balanced; bank advance rate 55% → €33 million credit line.
– Structure: €25 million on the Lombard line, €30 million marine mortgage.
– Annual debt cost: ~€2.125 million.
Example C: Bridge-to-liquidity
– Scenario: Committed to buy, awaiting business sale in 12 months.
– Portfolio: €40 million, high-grade; bank advances €24 million.
– Repay after liquidity event.
Does it pay to borrow?
If expected after-tax portfolio returns exceed after-tax borrowing costs, leveraging can be sensible.
Additional costs
– Arrangement fees, legal fees, appraisal, insurance, VAT/import, operating costs (8–12% of yacht price per year).
Risk management
– Diversify collateral
– Keep liquidity buffer
– Match currencies
– Hedge rate exposure
– Plan exits
Checklist
1. Define budget and usage
2. Assemble team early
3. Prepare portfolio
4. Obtain term sheet
5. Coordinate escrow and closing
6. Lock in insurance and flag
7. Post-closing housekeeping
Bottom line
Using a Swiss Lombard loan for a €55 million super-yacht lets you keep your investments working while unlocking liquidity to close the deal. For those with large, diversified portfolios and good risk management, it can be a discreet, efficient solution.
