Issue link: http://winesandvines.uberflip.com/i/365438
W i n e s & V i n e s s e p t e m b e r 2 0 1 4 41 loan structure has allowed us to main- tain a very healthy portfolio through the downturn and puts us in a healthi- er place today and where we are able to offer even more to wine industry clients. QUinTOn Jay: We have not changed our terms for second-lien debt. How- ever, for senior lenders and where rates have been, companies are looking to lock in these lower rates, and lenders are looking for shorter terms. Mark BrOdy: Terms can range from fairly standard for acceptable quality borrowers to fairly aggressive for strong borrowers. perry deLUca: Slightly longer terms. Majority of the terms remain the same as previous years. how has the availability of credit or leniency of lenders changed during the period? QUinTOn Jay: The wineries are divided up into three categories: very bank- able, marginally bankable and un- bankable. The very bankable still have the up- per hand and are getting the rates and terms they are looking for. The real analysis needs to be the marginally bankable. Recently I have not seen banks getting more lenient but wanting to keep their current posi- tions—not increasing them but not de- creasing them either. This has put pres- sure on wineries looking to grow beyond their bank's comfort levels. QUinTOn Jay: Second-lien debt has not changed very much. The adjusted risk/ rate profile (the cost of capital adjusted for the increased risk that second-lien lenders deal with compared to primary lenders with "first liens") has been the same at 10%-12% for second-lien debt, given that higher risk has always been factored into the rate. As for first- lien lenders, the rates are following the LIBoR and Fed's (rates). Mark BrOdy: overall rates are very competitive, particularly so for strong borrowers. perry deLUca: Rates continue to be competitive. how about loan terms? WiLLiaM BiShOp: In general, terms have remained unchanged year over year; however more wineries are re- questing refinancing proposals due to their (higher cost of) interest in longer term fixed-rate debt as well as (the) lower all-in cost of funding (from a re- financing). Financial performance as a whole has improved along with the economy, thus creating stronger bal- ance sheets and ability to negotiate better terms from banks. charLeS day: The primary structural terms of Rabobank's food and agri- business loans don't change signifi- cantly with the ups and downs of a given sector. Because of improving conditions, we are working with a higher number of qualified borrowers, but the basic elements haven't shifted simply because the wine market has improved. Staying disciplined with William Bishop is the managing director of the san Francisco, Calif., office of bMo harris bank Food and Consumer Group. bishop established the group's West Coast office in 1998. the office specializes in serving companies that produce wine, fresh fruits and vegetables, seafood and other foods and commodities. prior to joining bMo harris bank, bishop spent nearly 25 years in domestic and international banking, focusing on the food and commodity sectors. he held senior positions at Credit agri- cole (Calyon) and rabobank international. Mark Brody is a 30-plus-year banking veteran currently overseeing Umpqua bank's commercial-lending activities in the bay area. brody is senior vice president and manager of bay area commercial banking at Umpqua bank, where he leads the Wine specialty Group. brody was Ceo and gen- eral manager of Cline Cellars in sonoma, Calif., from 2001 to 2003 and founder of the Wine advisory Group. It is still not pretty for the unbankable. WiLLiaM BiShOp: There continues to be adequate availability of credit for wineries focused on managing the win- ery as a business. Banks are currently in a positive deposit position and stra- tegically looking for ways to invest their assets. capital expenditure plans and re- quests are well received by banks as trends in consumption and asset valua- tions continue upward. For well-quali- fied borrowers, loan covenants, pricing and structure have become more le- nient due in part to bank competition as well as greater comfort in asset valu- ations. For wineries that desire a pure lifestyle business, banks continue to require significant equity contribution from the owners. charLeS day: The availability of cred- it for Rabobank wine industry clients remained steady through the down- turn. However, overall we are seeing more availability as the improving market attracts new competitors. Thus far, traditional banks have not pushed the boundaries that might attract regu- lator attention, but appreciating vine- yard and winery asset prices will no doubt attract lenders that are willing to lend on asset values alone. Mark BrOdy: Banks will support strong borrowers with appropriate levels of credit and tailored structures that fit a given circumstance. As cred- it size shrinks and credit quality is ac- ceptable, structures and availability of credit is not much different than it has been. perry deLUca: The availability and leniency of credit is steady. competi- tion among lenders has prevented any major fluctuation. F I N A N C E F I N A N C E QUinTOn Jay "The wineries are divided up into three categories: very bankable, marginally bankable and unbankable." Mark BrOdy "Banks will support strong borrowers with appropriate levels of credit and tailored structures that fit a given circumstance."