NAB extends lifeline to Casella
NATIONAL Australia Bank has extended its debt facilities with family-owned winery Casella Wines, owner of juggernaut label Yellow Tail as talks continue between the winemaker and its lender.
The bank will negotiate with the company over future loan covenants it will accept in the face of the new economic landscape that includes a high Australian dollar and falling revenue.
Casella 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. These included the release of a new portfolio of premium wines, some of which could sell for $50 or $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. Those facilities 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 loss of $30 million for 2011-12, on the back of dwindling revenues caused by the high Australian dollar. The company exports about 75 per cent of its production to the US, making it highly exposed to currency movements and an appreciating dollar.
Mr Casella said the push into premium and luxury wines could generate fresh revenue and profits for the company, buffering it from losses triggered by a rising dollar. It would be a huge departure for Casella Wines, which has built its success over the past decade on the hugely popular Yellow Tail range of wines that sell for $10 and under.
Mr Casella told BusinessDay a new range of premium and luxury wines the winemaker was working on would probably not sell under the Yellow Tail label. It would rather have a new branding, possibly using the "Casella" name to gain market leverage from the family's long history in winemaking.
The new wines could be on the shelf in the next one to two years.
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