Blue Charter 1A

1.      Risk associated with the team's knowledge of the market and correctness of forecasts

Risk: The BLUE CHARTER team might not have (proper) knowledge of the market and/or make incorrect forecasts. 

Consequence: If the team does not have sufficient knowledge of the market, it could set incorrect targets. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of BLUE CHARTER, with partial or complete loss of the invested capital.

Note: BLUE CHARTER’s management has unrivalled experience in this field of activity. The order book is built from the Fountaine-Pajot pipeline. The company contractually limits operational risks to the operator who is responsible for maintaining the boat in good condition. The vessels are insured by BLUE CHARTER by default and their maintenance is checked by Fountaine-Pajot, where applicable.

2.      Risk associated with the need for new financing

Risk: Given the stage of development that project owner is in, it is likely that there will be a need for new financing. 

Consequence: On the one hand, there is the risk that the company will not find investors, which would lead to the dissolution or bankruptcy of the company, causing the investor to lose part or all of his investment. On the other hand, there is the possibility that the company will find new investors, which will lead to dilution, which will be even greater if there is a lower valuation than the one currently used.

Note: The company is looking at debt-financing as well and the first loan is currently being finalised with KBC. If there is another equity-financing, historic investors will have the opportunity to participate in new rounds, at the then current investment conditions to avoid dilution. 

1.       Risk associated with construction

Risk: There is a risk that BLUE CHARTER could obtain fewer production slots than expected or that there is a construction delay with deadlines that are incompatible with the back-to-back leasing contract. 

Consequence: If this risk occurs, the penalties owed by the shipyard will be higher than those that would be owed by BLUE CHARTER under the lease contract. This would mean the company will have set incorrect goals. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of BLUE CHARTER, with partial or complete loss of the invested capital.

Note: Fountaine-Pajot has very good fundamentals and a failure of their shipyard during construction is currently highly unlikely. Moreover, there is the possibility of having boats from other shipyards, which will limit or even cancel this risk.

2.       Risk associated with an economic downturn

Risk: There is an economic impact felt on the supply side. For example, an increase in interest rates has an impact on both new orders for new boats by private owners (who then delegate the management of their unit to a lessor) and on the acquisition of new boats by lessors. This ultimately increases the average age of the fleet and prevents it from growing in line with demand. 

Consequence: If this risk occurs, the company may set incorrect goals. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of BLUE CHARTER, with partial or complete loss of the invested capital.

Note: B to B leasing is an appropriate solution in this context, because it avoids the deterioration of the balance sheet metrics of the final lessors, and depending on the flexibility of the contract, it allows for more flexible fleet rotation. On the demand side, the global rental market has been growing steadily for about twenty years, despite economic crises.

3.       Risk associated with non-payment 

Risk: BLUE CHARTER can encounter a delay in the payment by its customers. 

Consequence: If the model used does not perform or underperforms, BLUE CHARTER will not be able to carry out its activities according to the set goals, which will jeopardize the execution of the business plan. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of BLUE CHARTER, with partial or complete loss of the invested capital.

Note: The claims rate over the last 16 years is very low. Experience has shown a maximum delay in payments of 3 months. Moreover, BLUE CHARTER considers that the risk of non-payment by a customer is an opportunity because it is always interesting to be able to recover a boat to resell it/or replace it (and thus collect the capital gain). It is also important to note that in the event of non-payment, there will be (1) credit insurance and (2) Fountaine-Pajot or other shipyards will use their networks to remarket the boat in question.  

4.       Risk associated with asset depreciation 

Risk: There could be a risk of asset depreciation of the vessels. 

Consequence: Should this risk occur, the model used by BLUE CHARTER might not be viable or not as profitable as foreseen. This could lead to a lower valuation in the event of a possible exit because the business plan could not be executed as planned. In that case, there could be lower or even non-existent returns. In the worst case, there could even be a liquidation and bankruptcy of BLUE CHARTER, with partial or complete loss of the invested capital.

Note: The value of the vessels is always higher than the outstanding credit (see latent capital gains) due to the purchase conditions, deposits and the first rental, but also in consideration of the lifespan of the vessels, which is almost twice as long as the maturity of the leasing contracts. The market is also deep enough for the sale of vessels to become a profitable and relatively easy opportunity.

Risk: The risk of insolvency means that BLUE CHARTER does not have sufficient funds to meet its payment deadlines (cessation of payments). 

Consequence: If the company does not find alternative financing (shocked credit), it may go bankrupt. The insolvency or bankruptcy of BLUE CHARTER may lead to lower or non-existent returns and in the worst case to a partial or total loss of the invested capital. 

Note: BLUE CHARTER benefits from a Fountaine-Pajot comfort letter for an amount of maximum €1,000,000, callable at any time.

1.        Risk associated with the lack of guarantees

Risk: Neither the shares of BLUE CHARTER nor the Participatory Notes of the BLUE CHARTER 1A compartment of Spreds Finance provide guarantees of a return or repayment of the invested capital. 

2.       Risk associated with the lack of a fixed return

Risk: Participatory Notes do not offer a fixed return. The return of the Participatory Notes depends solely on the performance of the Underlying Asset, namely the shares of BLUE CHARTER. 

Consequence for both risks: If the project owner's predictions do not come true (within the predetermined timing), there is a risk of lower or non-existent returns and, in the worst case, partial or complete loss of the invested capital. 

Note for both risks: Investors in Participatory Notes bear the same economic risk as if they were investing directly as shareholders of BLUE CHARTER.

Risk: Although each Spreds Finance compartment is ‘bankruptcy remote’ (meaning that no other creditor can claim a right on or against this compartment) in relation to the others and in relation to the ‘general’ liabilities of Spreds Finance itself, as a result of (i) the terms and conditions of the Notes, (ii) the articles of association of Spreds Finance and (iii)  Article 4 of the Law of 18 December 2016 on crowdfunding; there is a subsidiary risk of  insolvency of Spreds Finance. 

Consequence: Should such insolvency occur, Noteholders may be exposed to the risk of a significant delay in the recovery of their investment.

Note: The probability of this risk occurring is extremely low given the structure and organization of Spreds Finance, in particular the compartmentalization mechanism and the "bankruptcy-remoteness" described above. Each participation taken or loan granted to a project owner is recorded in a separate compartment and is appropriately accounted for in the accounts, taking into account the fact that the accounts are kept by compartment. As a result of (i) the conditions attached to the issue of Participatory Notes, (ii) the articles of association of Spreds Finance and (iii) article 10 of the law regulating the recognition and delimitation of crowdfunding and containing various provisions relating to finance and notwithstanding articles 7 and 8 of the Mortgage Law of 16 December 1851, the assets of a particular compartment serve exclusively to guarantee the rights of investors with respect to this compartment.

1.       Risk associated with the absence of an organized exchange market for Participatory Notes

Risk: Neither the project owner nor Spreds Finance organizes an exchange market for Participatory Notes. It is thus up to the investor himself to find a buyer for his Participating Notes. Given the absence of an exchange market for Participatory Notes, there is no way to adequately establish a comparative pricing methodology for Participatory Notes.

Consequence: A holder of Participatory Notes may not be able to find a buyer for the Participatory Notes it wishes to sell (at the price at which it wishes to sell).

Note: The intention is not to sell the Participatory Notes but to sell the Underlying Asset, often on the occasion of the sale of the Company itself.

2.       Risk associated with the vote by the general meeting of holders of Participatory Notes to sell

Risk: Any decision by Spreds Finance to sell shares of BLUE CHARTER is subject to the approval of the holders of Participatory Notes representing at least 75% of the outstanding Participatory Notes, unless Spreds Finance is required to sell them under a contractual or statutory provision. 

Consequence: Investors thus bear the risk that the general meeting of the holders of Participatory Notes may refuse to approve the sale of the participation, in which case all investors are bound by this decision and thus must wait to obtain redemption of the Participatory Notes.

3.       Risk associated with an investment in a young company

Risk: Investing in shares of young companies entails the risk that a buyer for the shares will not be found, or not at a fair price yielding a market return, or that a buyer will not be found within a reasonable period of time. 

Consequence: If no buyer is found for the holding, redemption of the Participatory Notes is not possible.

Note: Spreds Finance will make every effort within its powers to obtain the best possible price.

1.      Risk associated with the absence of an analysis by Spreds Finance

Risk: Spreds Finance has not conducted an analysis of the proposed project or of the financial situation of the Company.

Consequence: Any investor considering subscribing to Participatory Notes should make its own analysis of BLUE CHARTER's solvency, activity, financial situation and prospects.

Note: Any decision to invest in Participatory Notes should be based on a comprehensive analysis of the project and of this sheet of essential investment information. Spreds Finance's model does not provide for the presentation of analyzed projects to investors but allows investors to invest based on the information made available to them, after making their own analyses.

2.      Risk associated with a conflict of interest

Risk: One of the co-founders of BLUE CHARTER, Benoît Fally, is also a member on the board of the crowdfunding service provider, Spreds. While this has not in any way influenced Spreds’ decision to accept the project nor the procedure which was followed to launch the crowdfunding project, it might be thought that Spreds (and in case the offer is successful, later on the BLUE CHARTER 1A compartment of Spreds Finance) will favour this company by virtue of the link with the Spreds board member. This is not a risk related to the investment opportunity itself but rather a risk related to a potential conflict of interest for Spreds and Spreds Finance.

Consequence: There are no consequences with this risk for the investment itself. Left undisclosed, this situation would likely undermine the faith of investors in the impartial and objective exercise by Spreds of its duties and, as such, the confidence that customers may have in Spreds’ good management.

Note: In conformity with Spreds’ conflict of interest policy (https://www.spreds.com/en/conflict-of-interest), it is brought to the attention of investors that a person affiliated with Spreds (notably a non-remunerated, non-executive board member who also holds less than 1% of the Spreds-shares) is a co-founder of the company looking to raise funds through Spreds. The person in question was not involved in the decision to launch the campaign and - in the broadest sense - has no knowledge of the elements of the decision-making procedure. The person in question was not in any way involved in Spreds’ checks to validate the information made available to investors and will not be involved in Spreds’ validation of the information sent to investors when decisions are to be made (investment or sale decisions, for example). The person in question will also not be involved in any subsequent decisions that may be taken with regard to the project owner after the end of fundraising.

3.      Risk associated with the lack of (periodic) reporting

Risk: There is no obligation for periodic reporting in unlisted companies (except for the cases provided by law, such as the annual general meeting of shareholders and an alarm bell procedure). While some entrepreneurs proactively communicate good and bad news (with a certain periodicity), others do not. As a (minority) shareholder, one cannot enforce reporting (other than in cases provided by law).

Consequence: If an entrepreneur does not do (periodic) reporting, there can be long periods during which investors have no insight into the (financial) state of the company. The lack of reporting does not in itself change the (financial) state of the company but can create a sense of unease among investors. If at some point a company has to file a procedure of judicial reorganization or bankruptcy, this can be a (big) surprise for the investor. 

Note: Investors in Participatory Notes bear the same risk as if they invested directly in BLUE CHARTER and became shareholders. However, Spreds, as a crowdfunding service provider, tries to encourage each project owner to report at least 2x per year.

To the best of the project owner's knowledge, there are no other material risks associated with its activities.