The bankruptcy announcement in June left people who had put down deposits on Kadey-Krogen and American Tugs boats with a range of emotions. There was shock. Disappointment. Frustration. Anger. And, several buyers say, second-guessing themselves about whether they could have done more due diligence before handing over additional payments that they now may never get back.

“When we did the contract with them in 2025, American Tug had been doing good,” says Joe Ganete, who had an American Tug 365 under construction when the bankruptcy was announced. “They had orders. They were building boats. They had a factory full of employees. They’ve been around a long time. Kadey-Krogen has been around a long time. There were no concerns going into this deal.”

Similarly, a buyer of an American Tug 435 who asked to remain anonymous says: “We went to the factory. We met the people. They were building boats. They were at boat shows. People I know work for them. They’re a real thing up here in the Northwest.”

For many boat buyers, all of that would be enough. Brands with 25- or 50-year track records of building quality boats, new builds on display for tours, active owners’ groups, upcoming rendezvous—a lot of people would feel silly even thinking about those kinds of boatbuilders going bankrupt. That’s precisely the problem, says Michael T. Moore, founding partner of Moore & Company in Coral Gables, Florida. The firm, which dates to 2004, specializes in aviation, art and maritime law, and Moore has seen more than his fair share of boat buyers end up in trouble after sending money to all kinds of shipyards.

“There is a way to protect yourself, but the problem is that no one does it,” Moore says. “The due diligence before signing a contract for yacht construction? That is absolutely epidemic. Nobody does the due diligence.”

His firm performs that due diligence, including a financial health check. The firm also makes sure clients understand that if the boat’s construction goes south, they will need three things: a way to establish liability, a way to prove that they’re owed damages, and a way to collect.

It’s that last one, the ability to collect, that is leaving so many of the Kadey-Krogen and American Tugs buyers stymied right now, he says: “It’s like in Las Vegas. You get three lemons, you get the payout. You have two lemons, you have nothing.”

Moore says about 80 percent of the clients who purchase yachts with help from his firm ensure collectability by adding a performance guarantee to their contracts with the shipyard. A performance guarantee is backed by a third party—say, a sizable institution such as a bank or an insurer. It stipulates that the yard will deliver the yacht per the terms of the contract.

“The difference is that the yard is not saying, ‘Trust me,’ ” Moore says. “The yard is saying, ‘I’m giving you this performance guarantee issued by this insurance company or guarantor of some sort.’ A third party is involved. You are no longer relying on the credit of the yard.”

Not every yard will agree to a performance guarantee, he adds: “They are counting on the fact that the buyer is in love with their product so much that they’ll get pushed around.”

But a performance guarantee in the contract can make all the difference if the yard goes under, he says. “When you get that guarantee from Bank of America, it is the fact that they don’t just do it willy-nilly,” he says. “Bank of America has gone to that yard and said, ‘We’ve already loaned you $1 million. We’re going to loan you another $6 million to build this boat. Are you OK with that?’ The yard says OK, and Bank of America issues that guarantee. So it’s a deep-pocketed party issuing that guarantee.”

If the yard fails to deliver, Moore says, the boat buyer will usually be required to take certain steps, such as getting three to five bids from other yards that could complete the boat under the same terms and conditions as the original yard. Then the boat can be completed.

“I did this with a company in Germany, and the yard was incensed that I was asking for a performance guarantee, but I got it—and then the yard went under,” Moore says. “So the client was protected. We got the boat built because the guarantor paid the money to a different yard to finish the work. It was their credit, not the credit of the yard.”

Moore also says that if a boat buyer suspects liquidity problems mid-build, steps can be taken to protect the project before the yard declares bankruptcy. For instance, if a yard starts asking for payments before the contracted dates, he says, “I immediately go to the yard and ask if they can transfer title on the boat that day. Then I have to pray that the yard survives long enough that we don’t end up in bankruptcy court down the line. I’ll give you all the money you’re asking for now, but you give me the title now, so that if you’re in bankruptcy, I will have held the property for a sufficient amount of time, and I will be protected.” 

This article was originally published in the October 2026 issue.