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40 W i n e s & V i n e s s e p t e m b e r 2 0 1 4 What Finance Insiders Think An influential panel shares its views on trends, deals and interest rates By Ben Narasin DEBT how has the debt market for the wine industry been in the past year? charLeS day, raBOBank: It has im- proved and continues to offer more options for industry borrowers as gen- eral market conditions improve and more competitors enter the market. Mark BrOdy, UMpQUa Bank: For stronger borrowers, the market has been fairly accommodating. However, for borrowers with weaker financial performance, banks are appropriately conservative. perry deLUca, WeLLS FargO: Rising cost pressures are a result of tighter regulations. Bigger competitors have more flexibility in choices and navigat- ing the increased environment. QUinTOn Jay, BacchUS capiTaL Man- ageMenT: I think we are still seeing the same situation as last year in that the "very bankable" companies are getting over-banked, and marginal borrowers yet good companies (meaning they might be missing a key credit criteria) are having a difficult time. The un- bankable are still having a difficult time, and I don't see change in the fore- seeable future. What's happening/ happened with interest rates? charLeS day: This is really a two-part question: index rates versus rates that wine industry borrowers are being of- fered. Floating rate indices have remained at rock-bottom levels designed to stim- ulate the economy. We expect short- term rates to start moving up in early 2015. Longer term rates driven by bond prices have come up from record lows but remain historically very low. With the reduction in bond buying at the Fed level, and signs of inflation edging up, longer term rates could start rising soon as well. The other part of the question re- lates to what a given winery or vine- yard owner is paying. These rates are more and more competitive as the in- dustry improves and the perceived risk in the sector drops, combined with additional lenders participating in the market, which is driving loan spreads down. For modestly lever- aged, profitable wine industry compa- nies, all-in rates (rate index plus spread) are very attractive. WiLLiaM BiShOp, BMO harriS Bank: Rates continue to be at historical lows, but recent and potentially sus- tainable political disruption in certain parts of the world is giving concern. In addition, although the Fed contin- ues to manage low interest rates, the consumer price Index is clearly show- ing inflationary trends. Rents, medical care, clothing, food and other staples have been on the rise and will ulti- mately cause interest rates to rise. rOB McMiLLan, SiLicOn VaLLey Bank: Long-term rates have to be separated between spreads over an index and the index itself. We haven't seen a change in spreads over the past 12 months. That said, the best deals remain highly competitive. Long-term rates have, however, risen because the index wide- ly cited for long-term loans is the 10- year treasury, which has seen a tick up in the past year. Short-term rates have remained flat over the same period. Wine indUSTry Finance 2014 W e asked our panel of six finance experts what has been happening in wine industry finance during the past 12 months. here's what they had to say about: all photos: bill reitzel F I N A N C E F I N A N C E WiLLiaM BiShOp "although the Fed continues to manage low interest rates, the consumer price index is clearly showing inflationary trends." Highlights • six leading financiers sound off on the state of West Coast wine lending and investing. • lenders and investors say low rates and financial health led to the positive financing climate. • several panelists noted a gap between well-run wineries and weaker players viewed as 'unbankable,' and the growing importance of DtC sales.