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John Waggoner, Founder and CEO, American Queen Steamboat Company
In the wake of the 2008 subprime mortgage crisis, American Queen, the largest riverboat on the Mississippi—the largest ever built, by most measures—was decommissioned. Her operator Majestic America Line had defaulted on her mortgage. But where the banks were content to maroon this jewel of American history, John Waggoner saw an opportunity not just to make money, but to revitalize America’s great waterways with a neglected innovation: the paddle wheel.
For the preceding 20 years, Waggoner had run New Albany, Ind. Hornblower Marine Services (now HMS Global Maritime), which managed boats for casino and ferry operators. He had long wanted a fleet of his own, but purchasing the decadent Queen was an about-face for the lucrative business. “This was a departure for us,” he explains, “but the economics made sense. The demand for riverboats hadn’t gone anywhere, but the supply had basically been cut to zero.”
Sweetening the deal, the United States Maritime Administration, who had held the mortgage on Queen, was willing to cut Waggoner a bargain at $15 million—a fraction of the $100 million it would cost to construct a comparable boat. Waggoner cobbled together a loan from several small lenders. He laughs when he recalls the process. “One piece was a HUD loan for $9 million. They treated it like a house. I had to tell them, ‘Yes, the property is located in a floodplain, and yes, there is sometimes water in the basement, but we call it the bilge.”
He found the additional $15 million needed for renovations and an office in Memphis, which had started construction on an expensive new dock just before the 2008 crisis. “They had a dock, but no boats. So Mayor A C Wharton convinced the city and several high wealth individuals to make up the rest of the loan—at 36 percent interest.” On top of everything, Waggoner had to put up personal guarantees. “My wife honestly thought I was going to have a heart attack. I couldn’t promise her we wouldn’t lose our house.”
For two years, Waggoner and his team poured blood and sweat into Queen. “My team and I took tremendous pride in the restoration. We saw to every detail, down to the mahogany handrails, brass outlet covers and matching screws. Even the engine room is pristine.” The restoration was well-received, but HMS nonetheless lost $7 million during her first year back in operation. Wagonner didn’t lose faith. “The elevator pitch was—and still is—really straightforward: We buy distressed assets at a distressed price and use our knowledge to revitalize them for an underutilized market.”
The paddles kept turning, and after that first rocky year the money started flowing in. “People are hungry for nostalgia,” Waggoner explains. “One passenger might want to explore the old antebellum mansions along the river, while the highlight for a WWII vet might be talking shop over a coffee with the engine room crew.”
Waggoner’s success running overnight cruises prompted the Maritime Administration to offer HMS a second riverboat, American Empress. After this venture proved successful, Waggoner set his sights on new boats—and more ambitious restorations. “Queen and Empress were already outfitted as overnight cruise vessels. We had to completely gut American Duchess, a
casino boat, and we’ve cut the American Countess in half and added a 60 ft. mid-section so she will carry enough passengers to be profitable when she’s launched in 2020.”