Vintage Wine Announces Forbearance Agreement Extension with Lenders

Rhea-AI Summary

Vintage Wine Estates, Inc. (Nasdaq: VWE and VWEWW) extends forbearance agreement with lenders, defers $10 million payment to May 15, 2024. CFO Kristina Johnston highlights ongoing discussions to advance asset sales, inventory monetization, and cost reductions, aiming to simplify the business model and focus on profitable brands.

Insights

Financial Analyst

The extension of the forbearance agreement between Vintage Wine Estates and its lenders is a significant development, reflecting the company's current financial strain and its efforts to restructure its operations. The deferral of the $10 million principal payment shows a short-term liquidity relief, which can be critical for the company's day-to-day operations. However, it also indicates that VWE is facing challenges in meeting its financial obligations.

From a financial perspective, the extension suggests that the lenders still have confidence in VWE's ability to turn around its business, as they have not yet exercised their rights and remedies. This could be seen as a positive signal to investors that there is a path forward for the company. However, it's also important to note that such forbearance agreements typically come with stricter covenants and oversight, which could limit the company's operational flexibility.

The focus on 'Super Premium+ priority brands' indicates a strategic pivot to higher-margin products which could potentially improve cash flows. However, the success of this strategy hinges on the company's ability to effectively monetize its inventory and execute on its asset sales. Investors should monitor the company's progress in these areas closely, as they are essential for the long-term sustainability of the business.

Market Research Analyst

The shift in strategy to concentrate on 'Super Premium+ priority brands' suggests that Vintage Wine Estates is aiming to cater to a more affluent segment of the market. This move could be in response to market trends that show a growing consumer preference for premium products. If executed well, this could lead to a stronger brand proposition and better margins.

However, the wine industry is highly competitive, with numerous players vying for market share. The success of VWE's narrowed focus will depend on its ability to differentiate its products and maintain a strong value proposition. Additionally, the company's ability to generate cash will be critical in the coming months, especially as it seeks to renegotiate its lending agreement.

Investors should also be aware of the broader economic context, as discretionary spending on premium products can be sensitive to economic downturns. The company's reliance on asset sales and inventory monetization as part of its business plan could be a double-edged sword, potentially providing necessary capital but also indicating a need to liquidate assets to manage debt obligations.

Debt Restructuring Advisor

The amended forbearance agreement and the deferral of a significant principal payment are indicative of a company in the midst of a delicate debt restructuring process. This process often involves complex negotiations with multiple stakeholders, with the aim of achieving a sustainable capital structure for the company going forward.

For Vintage Wine Estates, the extension to May 15, 2024, provides a important window to continue discussions with lenders. It is imperative that the company uses this time effectively to address its liquidity concerns and operational challenges. The mention of potential asset sales and cost reductions is a common strategy in such situations, aimed at reducing debt and focusing on core profitable operations.

However, stakeholders should be cautious. While the forbearance indicates a temporary reprieve from immediate financial distress, it does not resolve the underlying issues that led to the financial difficulties. The long-term impact on the company's financial health will depend on the successful implementation of the restructuring plan and the market's reception to the re-focused brand portfolio.

SANTA ROSA, Calif.--(BUSINESS WIRE)-- Vintage Wine Estates, Inc. (Nasdaq: VWE and VWEWW) (“VWE” or the “Company”) today announced that the Company and its lender group have amended the forbearance agreement dated March x, 2024 to extend the forbearance period to May 15, 2024. The lenders have also agreed to the deferral of the $10 million principal payment previously due at March 31, 2024 to May 15, 2024.

Kristina Johnston, Chief Financial Officer, commented, “We are continuing productive discussions with our lenders as we work to advance potential asset sales, the monetization of inventory and cost reductions. We believe we have presented a viable business plan that transforms VWE into a much simpler business focused on a sustainable core of Super Premium+ priority brands which, importantly, can generate cash. The extension of the forbearance agreement provides additional time for further discussions with the lenders regarding an amended lending agreement as we execute on our plans.”

Under the amended forbearance agreement, the lender group has agreed to not exercise any rights and remedies until May 15, 2024, so long as the Company complies with the terms of the forbearance agreement as amended and otherwise remains in compliance with the Second A&R Loan and Security Agreement.

About Vintage Wine Estates, Inc.

Vintage Wine Estates brings to market a unique portfolio of cider and Super Premium+ wines at $15+ per bottle. The Company focuses on building enduring and differentiated brands that resonate with consumers to generate increasing organic demand in the U.S. It leverages brand-affiliated wine clubs, tasting rooms, and owned ecommerce sites in conjunction with deep wholesale relationships to offer consumers a holistic, omnichannel experience. VWE’s ambition is to be one of the fastest growing players in the branded wine space with best-in-class profitability and consistent cash generation to create value for all stakeholders. The Company is doubling down on a culture that is uniquely consumer-centric and intensely data-driven in service of over fifteen core wine brands spanning approachably priced lifestyle labels and high-scoring premium brands.

Forward-Looking Statements

Some of the statements contained in this press release are forward-looking statements within the meaning of applicable securities laws (collectively, “forward-looking statements”). Forward-looking statements are all statements other than those of historical fact, and generally may be identified by the use of words such as “believe,” “intent,” “may,” “plan,” “should,” “can,” “expect,” “continue,” “working,” “will,” or other similar expressions that indicate future events or trends. These forward-looking statements include, but are not limited to, statements related to business plans and strategies; the ability of the company to monetize non-core assets and for such monetization to generate cash to reduce debt and optimize operations; the timing and expectations related to the sales process including the work to sell stand-along DTC operations, certain production service businesses, and other non-core assets including through indications of interests, bids, and the non-binding letter of intent; the ability of the Company to simplify its business and for such simplification to allow it to leverage its human and financial resources; the ability of the Company to restructure its foundation and for such foundation to support faster growth and deliver profitability; the ability of the company to remain in compliance with the forbearance agreement and cure its events of default before the term of the amended forbearance agreement; the ability of and timing related to VWE entering into an amendment to its credit agreement with its lenders. These statements are based on various assumptions, whether or not identified in this news release, and on the current expectations of VWE’s management. These forward-looking statements are not intended to serve as, and should not be relied on by any investor as, a guarantee of actual performance or an assurance or definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and may differ materially from those contained in or implied by such forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the control of VWE. Factors that could cause actual results to differ materially from the results expressed or implied by such forward-looking statements include, among others: the Company’s ability to continue as a going concern; the Company’s ability to deleverage within the anticipated time frame or at all and its ability to achieve its cash flow forecasts and regain and remain in compliance with the covenants in its credit agreement, or satisfy its other contractual arrangements, including the amended forbearance agreement with its lenders; the ability of the Company to regain compliance with Nasdaq continued listing requirements; the Company’s limited experience operating as a public company; the time and expense associated with any necessary remediation of control deficiencies; the ability of the Company to effectively execute its strategic plans to reimagine the Company; the ability of the Company to retain key personnel; the effect of economic conditions on the industries and markets in which VWE operates, including financial market conditions, rising inflation, fluctuations in prices, interest rates and market demand; risks relating to the uncertainty of projected financial information; the effects of competition on VWE’s future business; risks related to the organic and inorganic growth of VWE’s business and the timing of expected business milestones; the potential adverse effects of pandemics, or other outbreaks that could disrupt VWE’s business and the U.S. economy; declines or unanticipated changes in consumer demand for VWE’s products; VWE’s ability to adequately source grapes and other raw materials and any increase in the cost of such materials; the impact of environmental catastrophe, natural disasters, disease, pests, weather conditions and inadequate water supply on VWE’s business; VWE’s level of insurance against catastrophic events and losses; VWE’s significant reliance on its distribution channels, including independent distributors; potential reputational harm to VWE’s brands from internal and external sources; possible decreases in VWE’s wine quality ratings; integration risks associated with recent acquisitions; possible litigation relating to misuse or abuse of alcohol; changes in applicable laws and regulations and the significant expense to VWE of operating in a highly regulated industry; VWE’s ability to maintain necessary licenses; VWE’s ability to protect its trademarks and other intellectual property rights; risks associated with the Company’s information technology and ability to maintain and protect personal information; VWE’s ability to make payments on its indebtedness; and those factors discussed in the Company’s most recent Annual Report on Form 10-K and in subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission. There may be additional risks including other adjustments that VWE does not presently know or that VWE currently believes are immaterial that could also cause actual results to differ from those expressed in or implied by these forward-looking statements. In addition, forward-looking statements reflect VWE’s expectations, plans or forecasts of future events and views as of the date and time of this news release. VWE undertakes no obligation to update or revise any forward-looking statements contained herein, except as may be required by law. Accordingly, undue reliance should not be placed upon these forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240402907908/en/

Investors:

Deborah K. Pawlowski, Kei Advisors LLC

dpawlowski@keiadvisors.com

Phone: 716.843.3908

Source: Vintage Wine Estates, Inc.

FAQ

What is the ticker symbol for Vintage Wine Estates, Inc.?

The ticker symbol for Vintage Wine Estates, Inc. is VWE and VWEWW.

What was the amendment made by Vintage Wine Estates, Inc. to the forbearance agreement with lenders?

Vintage Wine Estates, Inc. extended the forbearance period to May 15, 2024, and deferred the $10 million principal payment previously due at March 31, 2024.

Who commented on the ongoing discussions with lenders at Vintage Wine Estates, Inc.?

Kristina Johnston, the Chief Financial Officer, commented on the ongoing discussions with lenders at Vintage Wine Estates, Inc.

What is the focus of Vintage Wine Estates, Inc.'s business plan?

Vintage Wine Estates, Inc.'s business plan aims to simplify the business model and focus on a sustainable core of Super Premium+ priority brands to generate cash.

Until when have the lenders agreed not to exercise any rights and remedies as per the amended forbearance agreement?

The lenders have agreed not to exercise any rights and remedies until May 15, 2024, under the amended forbearance agreement.