“The only really successful way for someone to start up is to bring in the owner of an existing ship that is willing to put his ship into the venture in exchange for equity in the operation, and then it becomes somewhat easier to raise money,” said Peter S. Shaerf, managing director of AMA Capital Partners, which does considerable consulting, financing and behind-the-scenes work in the small cruise ship world.

Shaerf structures deals, brings private equity investors to the table and also manages a good bit of cruise ship advisory business: consulting, charters, acquisitions and mergers, according to the 2019 Expedition Market Report by Cruise Industry News.

Specializing in small- and medium-sized ships, Shaerf finds himself doing a lot of valuation work for the firm, a self-described boutique merchant bank.

“There are a number of ways to do it – whether it’s a replacement value, cash-flow analysis, and then there is a market analysis. The market analysis becomes much harder because very few ships are sold and it’s hard to find a similar ship. Valuing ships, and I’ve valued over 1,000, is an art and not a science, especially with cruise ships.

“In truth, there is a very small universe of buyers.”

Over the years, AMA has managed some notable projects, including the bankruptcy of Renaissance Cruises in the early 2000s – finding new homes for eight ships for Credit Agricole. That project ultimately also led to the formation of Oceania Cruises.

AMA partner Jim Dolphin served on the board of Oceania from the outset.

American Classic Voyages was another one, as AMA oversaw the bankruptcy and the selling of ships to the highest bidder on behalf of the U.S. government.

‘Dollar and a Dream’

Working from two top floors in the Chrysler Building, Shaerf and AMA are often approached by those with a dollar and a dream, wanting to start a new cruise line.

“There are some projects out there, but they are not real buyers; they don’t really have money,” Shaerf said.

“We also field a huge number of inquiries of people wanting to start cruise lines who have a great idea, maybe a couple of friends with some money, but not the money needed to start a cruise line.”

And even if a startup could track down a ship and some money, it is easier said than done.

“Even if you could buy a cruise ship cheaply … maybe $10 million gets you a little, old 1970’s built Greek ship. How much have you got to put into the ship to get it right and how much working capital do you need to sustain it?

“A startup operation could be $30 to $50 million with an old existing ship. And you are not going to get financing on a new ship if you are a start up.”

Banks and investors also like to see equity from the owner, in the form of 20 or 30 percent.

Private equity firms can be few and far between in cruise line financing.

“They look at the big guys, and say why is someone going to go on your ship and not (someone else). And what does your new venture bring to the table?”

Capacity expansion is not a major concern for AMA or its connections in the finance world. Shaerf said that while there was a lot of tonnage coming into the expedition market, the ships were relatively small, and older vessels are being phased out.

“Buying into the cruise growth story, that is real,” he said.

Projects

 But in between the dreamers, there have been various successful start ups managed by AMA, and even more expansions of existing brands.

 An existing brand with a customer base that wants to grow is by far the most attractive option for investors.

“If you want to raise capital you have to have a proven product and have to be able to show the growth in your business,” Shaerf told Cruise Industry News. “You’ve got to have some sex appeal and something that tells a good story – your growth, market, expansion plan and it has to be well thought out.

“You have to be able to bring something special to the table. There are other operators that can do the same thing, and the (established companies) can do it a lower cost than you, and throw marketing dollars at it

“To expand you have to be expanding from a real base and you have to expand slowly.”