The next America's Cup in 2017 has been thrown into turmoil with the official Challengers of Record, Team Australia, withdrawing from the regatta because of the mounting costs.
Organisers said on Saturday that Australia's Hamilton Island Yacht Club had withdrawn its challenge for the 35th America's Cup event, which is to be sailed in 2017 in either San Diego or Bermuda.
"The America's Cup organisers have received notification from the principals of Hamilton Island Yacht Club of their intention to withdraw Team Australia from the 35th America's Cup," America's Cup Event Authority chief executive Russell Coutts said in a statement.
"We are very disappointed to be receiving this news. We were excited to have Australia as a challenger and we were also looking forward to the prospect of holding America's Cup World Series events in Australia."
Wine tycoon Bob Oatley, who owns the Hamilton Yacht Club, said it had been a financial decision.
"The challenge was initiated with a view to negotiating a format for the 35th America's Cup that was affordable and put the emphasis back on sailing skills," he said.
"Ultimately our estimate of the costs of competing were well beyond our initial expectation and our ability to make the formula of our investment and other commercial support add up.
"We are bitterly disappointed that this emerging team of fine young Australian sailors will not be able to compete at the next America's Cup under our banner."
Hamilton Island were named as Challengers of Record, who represent all of the challenging teams in negotiations with the holders of sport's oldest sporting trophy, after software billionaire Larry Ellison's Oracle Team USA retained the Cup last year.
Oracle won the final winner-takes-all race in San Francisco beating New Zealand 9-8 after the Dean Barker-skippered New Zealanders had held an 8-1 lead before the American team roared back.
New Zealand's challenge, which was partially government funded, have said they will challenge again, though a lack of clarity on the venue had been putting potential sponsors off committing to fund the venture.
Local media have reported that sponsors were also concerned at the move away from San Francisco.
Oracle and Hamilton Island released the protocol for the next event last month.
The event will be sailed with a similar but smaller version of the 72-foot (21.94-metre), wing-sail catamarans used in 2013.
The new 62-foot boats, called AC62s, will be crewed by eight people, three fewer than last year.
Nationality rules have also been introduced with at least two of the eight crew members having to be nationals of the country of the yacht club represented.
The venue will be announced in October.
Britain's Olympic champion Ben Ainslie, who was the tactician on Oracle and widely credited with turning their fortunes around in the last regatta, has said he will head a British challenge.
America's Cup organisers said on Saturday the British were still continuing with their challenge.
"While the withdrawal of the Challenger of Record is regrettable, it is also not unusual and we will continue our own preparations for the 35th Americas Cup and look forward to an exciting future," a statement from Ben Ainslie Racing read.
(Reporting by Greg Stutchbury and Nick Mulvenney; Editing by Amlan Chakraborty/Patrick Johnston)