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North Bay Business Journal

Monday, April 23, 2012, 6:25 am

Access to financing easing for wine industry, lenders say

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    Peter Kaufman. Rob McMillan. Perry DeLuca

    Peter Kaufman. Rob McMillan. Perry DeLuca

    NORTH BAY – Borrowers in the wine industry have found it easier to access financing in the recovering economy, with industry lending experts citing a warming approach to commercial lending from traditional sources and an uptick in interest for specialty non-bank lending.

    That interest in financing – an indicator of business activity and expansion – has been strong in the fine wine sector and among small to medium-sized family wineries, according to Peter Kaufman, co-founder and managing partner of the wine-focused private equity fund Bacchus Capital Management.

    Yet others in the industry are also looking to finance growth, following a general recovery trend, he said.

    At Bacchus, Mr. Kaufman said that the increase in interest for capital from the San Francisco-based private equity fund has spanned the spectrum of credit worthiness, with some seeking to augment an existing line of credit and others seeing it as an option when unable to qualify for other financing.

    The firm is now looking at providing capital for “four to five” wineries interested in arrangements similar to the equity investment in Dry Creek Valley-based Sbragia Family Vineyards last year, a deal that Mr. Kaufman said was the first of its kind for Bacchus since it began in 2007. At that time of the deal, Sbragia founder Ed Sbragia told the North Bay Business Journal that the expertise of the wine-focused fund was an appeal, and that the financing would help the company’s expansion “after a couple of hard years.”

    “We’re extremely busy – we’ve been doing things all over the capital structure,” said Mr. Kaufman.

    The Federal Reserve has indicated that commercial and industrial lending has become more robust in the past year, and Silicon Valley Bank’s Rob McMillan said that he saw that trend extending to the wine industry. The founder of the bank’s Wine Division, McMillan said that the past year supported his forecast of the onset of “long-term steady growth” in his last annual “State of the Wine Industry” report.

    In the final stages before releasing a new report this month, Mr. McMillan said that banks were steadily increasing their willingness to provide financing to wineries with less credit worthiness.

    “I think bankers are taking a look and seeing if there is something that they can buy off on,” he said.

    The continuation of low, long-term interest rates could also be a boon to borrowers who qualify for those loans, said Perry DeLuca, industry head and team leader for the Wine, Food & Beverage group in the North Coast Commercial Lending Office of Wells Fargo.

    The Federal Reserve announced in January that it would work to keep those rates low through at least 2014, a move intended to stimulate borrowing across industries, including wine.

    “Debt is more effective when interest rates are low, and that’s where we stand today,” Mr. DeLuca said.

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