Feb. 9 (Bloomberg) -- Ferretti SpA, the Italian maker of luxury yachts, missed an interest payment on 1.08 billion euros ($1.4 billion) of senior loans used to finance its buyout in 2007, according to a letter from facility agent Royal Bank of Scotland Group Plc obtained by Bloomberg News.

Ferretti, whose boats sell for an average 2 million euros, failed to make a 1.4 million-euro payment on the loans Jan. 30, constituting an “event of default,” the letter said. The Forli, Italy-based company said in a statement today that the payment is related to an interest-rate swap with RBS on the senior loan, and that it earlier failed to pay interest on the debt’s 200 million- euro lower-ranking “mezzanine” facility.

RBS is “working with the company to find the best solution,” said Piers Townsend, a London-based spokesman who declined to comment on the letter.

“We’re likely to see more leveraged companies follow the way of Ferretti,” said Louis Gargour, chief investment officer at LNG Capital LLP, a London-based hedge fund. “If demand is falling in the sector, very quickly we’ll see companies missing interest payments and defaulting on debt.”

Ferretti raised 1.28 billion euros of senior and so-called mezzanine loans in January 2007 to fund private equity firm Candover Investments Plc’s purchase of a majority stake through a leveraged buyout, according to data compiled by Bloomberg.

Lenders are considering a debt restructuring proposed by the company, which was founded in 1968 by Alessandro and Norberto Ferretti, RBS’s Feb. 3 letter said.

Interest-Rate Swap

“Ferretti SpA specifies that it was not in default with respect to the payment of interest on the senior debt and that the only missed payment regards the interest on the mezzanine debt,” the statement said. The 1.4 million-euro payment “relates to an interest-rate swap contract in place between Royal Bank of Scotland and Ferretti,” the company said.

Ferretti generates about 75 percent of its business outside Italy, including 15 percent in the U.S. One of its Riva yachts was featured in the George Clooney movie “Ocean’s Twelve,” while the 60-meter (200 feet) long GiVi mega-yacht comes with a game room, gym, helicopter pad and what Ferretti’s Web site describes as a “wellness area.” Sales dried up as the seizure in credit markets worsened, prompting the yachtmaker to announce last week that it’s firing workers.

London-based Candover owns 50.2 percent of the company as a result of the LBO, while Ferretti’s management holds 39.1 percent and Permira Advisers LLP, another London-based private equity firm, has 10.7 percent. The Ferrettis sold the company to outsiders after Alessandro Ferretti died in 1995.

In an LBO, firms borrow the majority of the money needed to finance their purchases in the name of the target.

‘Dynamic’ Market

Ferretti sought to renegotiate the loans, which were taken out “when the market was especially dynamic,” the company said in a Feb. 2 statement on its Web site. NM Rothschild & Sons Ltd., the family-owned investment bank, is advising the yachtmaker, the statement said.

Traders of credit-default swaps used to hedge against losses on Ferretti’s loans are to settle the contracts after a conference call today, administrator Markit Group Ltd. said. The contracts pay the buyer face value or the cash equivalent in exchange for the underlying security should a company violate its borrowing terms.

Peter Hewer, a spokesman in London for Candover, which planned to sell the yachtmaker last year in an initial public offering, declined to comment.

The yachtmaker’s senior loans traded at 22 percent of face value at the end of last week, according to Markit Group prices.

To contact the reporter on this story: Caroline Hyde in London chyde3@bloomberg.net.

Last Updated: February 9, 2009 16:56 EST