Debt hurt Hinckley Yachts when downturn hit

SOUTHWEST HARBOR, Maine. — Like everyone else, Hinckley Yachts has lost business in current downturn, and that has been made more painful by the amount of debt the company took on during the good years, according to a recent New York Times profile of the company.

Bain Willard Companies, a Boston-based private equity firm, was the first buyer, 12 years ago. It paid about $20 million, equal to about one year in sales, putting down about 25 percent in cash and borrowing the rest, according to the Times. Bain Willard expanded Hinckley, opening service centers in Florida, Maryland, Rhode Island and other places. In 2001, it sold about 51 percent of Hinckley to Monitor Clipper of Boston for an estimated $40 million in debt and equity.

But after Sept. 11, 2001, and the start of war in Iraq, boat buyers became nervous and growth stalled. In 2005, Hinckley sold its real estate across the country, raising enough money to pay down much of its debt, the Times reports. It leased back the land, replacing interest payments with rent payments.

The private equity buyers had been convinced, the Times points out, that the yachting business could weather any economic storms because its wealthy clients would continue to buy.

Because Hinckley is privately held, its finances aren’t public, but the Times says Hinckley may well survive the downturn thanks to a strong brand name and a loyal clientele.

However, critics say the company would have been better positioned if it had remained a family business.

“If they had not had that debt, we could have weathered this,” Ruth Brunetti, who was with the company for 20 years as chief financial officer, treasurer and contracts negotiator until she was dismissed in July, told the Times. “We have suffered from a double impact: the economic downturn and corporate greed.”

To read the complete profile, click here.

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