Debt talks spur a premium push
THE National Australia Bank has extended its debt facilities with family owned winery Casella Wines, the owners of juggernaut label Yellow Tail.
The bank is continuing talks with the company over future loan covenants it will accept in the face of the new economic landscape which includes a high Australian dollar and falling revenue.
Casella's chief executive, John Casella, told BusinessDay the talks were positive and the family was investigating a number of opportunities and strategies to bolster the businesses over the next few years including the release of a new portfolio of premium wines, some of which could sell for $50 to $100 a bottle.
"I think the bank is doing the right thing and being clever, saying to us I know what you need today, and I know you can travel over the next 12 months without issues and maybe even 18 months.
"But all we want to know now is what your plan is longer term because maybe the dollar won't recede," Mr Casella said.
"And that's what we are working through, so there is enough facilities in place for us not to get into a crisis within the foreseeable future."
Originally Casella Wines had a January 31 cut off to renew its debt facilities. They have been extended, not renewed, as talks continue. Casella Wines, one of Australia's biggest and most successful winemakers, posted its first loss in 20 years last financial year, recording a deficit of $30 million, after dwindling revenues caused by the high dollar. The company exports around 75 per cent of its production to the US, making it highly exposed to currency movements.
Mr Casella said the push into premium and luxury wines could generate fresh revenue and profits. It would be a huge departure for Casella Wines, which has built its success over the past decade on the popular budget Yellow Tail range.