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Friday 25 July 2014

Fine wine being pawned for cash in New York

20th August, 2013 by Lucy Shaw

The practice of using fine wine as collateral to secure short-term loans is gaining traction in New York.

Liquid assets: the Bordeaux first growths are being used as collateral to secure short-term loans

According to The Financial Times, investors in urgent need of money are resorting to pawning their bottles of Château Lafite and Château d’Yquem.

Paul Aitken, founder of Manhattan lender borro, told the FT that there had been a recent surge in the use of wine as collateral to secure loans of over US$100k at interest rates of 2.5-4% a month.

“The loans we are writing on wine are big. One bottle of Château d’Yquem had a loan offer of US$48,000,” he said.

At borro, whose clients include entrepreneurs in search of instant cash flow, the value of loans backed by fine wines stands at US$4m – double that of last year.

While admitting to the FT that borro’s business model shares “similar principles” to that of a pawnbroker, Aiken is keen to distance himself from the association.

“Most pawnbrokers don’t do this type of lending. They typically lend against gold and firearms. We don’t go near that stuff,” he told the paper.

In addition to the five Bordeaux first growths, Pomerol-based Château Pétrus and Burgundy’s Domaine de la Romanée-Conti are the wines most commonly used as collateral to secure loans through borro.

Borro provides fast loans of up to $1m on valuables including fine wine, watches, jewellery, luxury cars, fine art and antiques. To date it has funded loans to the value of $83.7m.

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