SAM in practice
devastated parts of Australia's agriculture sector in recent
years and a slump in prices within the commodities market
have exacerbated companies' fïnancial difficulties.
"The New Zealand market has seen a much more rapid
increase in distressed clients over the past year due to
significant drops in commodity prices (especially within
the dairy sector), a stagnant property market and declining
asset values," she says. 'The wine industry in both countries
has also been adversely affected by increasing tonnages
of fruit as vineyards mature, leading to a massive drop in
bulk wine prices. And with the effects of the global fïnancial
crisis being feit more by our retail clients, we are witnessing
a significant drop in the number of refïnance opportunities
as the banking sector's appetite for taking on new loans
contracts and property market sales fall."
Like her colleagues in Utrecht, Helen explains that mutual
trust, respect and commitment between the cliënt and SAM
Australia New Zealand are critical for success. "It is very
important that the cliënt understands the seriousness of
their position and commits to working towards a solution,"
she says. "Given that the front office works very hard to only
take on clients with integrity, we do not have many cases
where we are unable to work through the issues with a
cliënt. However, it is always made very clear to a cliënt that
if they are not prepared to work with us, or if they are not
open in their dealings with us, then we will act to protect
our position. Thankfully, though, this is very rare."
company's structure, and the amount
and structure of the debt, as well as
the family's reluctance to focus on the
importance of cash. Once SAM became
involved, a consistent message was
delivered - the company needed to
address lts high cost structure, debt
needed to be reduced significantly
from the sale of assets, and the group
needed to assess where it wanted
to be in the industry.
It required tact and a certain forcefulness
to persuade the company's family
members that the business they had
built up needed to adapt in order to
flourish in the changing environment,
but the outcome was satisfactory.
Within one year, the company achieved
a AUD 2 million reduction in its cost
structure. It also appointed an Executive
Management team that included two
external parties who could provide
independent advice, and this has proved
to be an important feature, particularly
with a dose-knitfamily-run business.
The management of the company agreed
that debt reduction through asset sales was
paramount and agreed to list the winery
This case study focuses on a major,
family-run, winery in Australia, which
began as a wine grape grower, supplying
major wine companies in the 1970s.
Today, this winery operates the second
largest privately run vineyard in the
major wine region of south Australia,
having grown the business through
debt funding on the back of capital
appreciation of the land as the vines
matured.
In 2002, the company was refinanced by
Rabobank. Despite fïnancial projections
that showed a satisfactory annual debt
amortisation from cash flow, this failed
to materialise as the company suffered
from a sharp decline in sale prices, the
adverse effects of extreme temperatures
at harvest, and a high fïnancial burden
from debt and hire purchase obligations.
In 2006, Rabobank Australia SAM became
involved after the company suffered
a liquidity crisis that threatened its
survival. SAM was concerned about the
Today, although the company remains
a concern, SAM has built up a close,
transparent relationship with the family
and continues to help them establish other
outlets for their products and to work
towards a successful debt reduction.
THE WORD
complex for sale, which means the company
will effectively return to being a fresh grape
producer, albeit with a reduced debt level.
Unfortunately, this decision coincided with
the widespread decline in the Australian
wine market, in which minimal assets are
currently changing hands. So far, there have
been no offers for the winery.