Naked Wines: ‘no losses’ expected from Silicon Valley Bank failure

Naked Wines is looking to calm the stock market by issuing an update in the wake of the failure of the Silicon Valley Bank (SVB), saying that its day-to-day operations are “unaffected” and that no losses were expected as a result of the SVB failure. 

The wine subscription service said that trading in the 2023 financial year was consistent with the guidance provided in January – although it confirmed it was looking for “a new banking partner”.

The failure of the US California-based bank – the first major bank to fail in the US since 2008 – is significant as it was a major lender to the wine industry, particularly US-based premium wine companies. Its website said that it had loaned over $4 billion in loans to the wine industry since 1994, with around $1.2 billion in current outstanding loans, according to its  Q4 earnings announcement. However its wine business made up only around 2% of its overall business. 

Group chief executive Nick Devlin offered his assurance, saying that although the situation remained fluid, “we maintain a robust balance sheet with approximately £185m of stock and £17m of immediately accessible cash”,

“We remain focussed on delivering for our customers and winemakers and continuing to execute against the pivot to profit strategy announced in October,” he said. 

In a statement, Naked said that the Group held cash with SVB in a variety of accounts in the USA and UK, with the bank also acting as “administrative agent and issuing lender” for the Group’s $60m asset-backed credit facility. It said that out of its £32 million cash on hand, less than £0.6m was considered to be “at risk and potentially uninsured due to the closure of SVB”.

And although SVB acted as a custodian for a £14m cash sweep account, the Group would be entitled to a full return once any procedures required by the FDIC had been completed. “The contract terms of this account state that these funds are held by SVB as agent and that in the event of a failure of the bank the Group’s ownership interest should be recognised,” it confirmed, although it added that currently the timeframe to gain full access to these funds was not yet known.

It also pointed out that the Group’s $60m asset backed credit facility, which was syndicated equally between SVB and Bridge Bank, to provide liquidity protection in the event of weaker trading than expectations as well as day to day liquidity. “We have engaged in direct discussions with Bridge Bank who remain supportive of the Group and have indicated their desire to continue providing their services. While awaiting information from SVB and their successor business as to their intentions the Group has commenced a process to identify potential new financing partners.” it said. 

In January, the group increased its revenue forecast for the current year from £9-£13 million to £13-£17 million, a welcome uptick for the company following a tough 12 months that saw several changes to its leadership team amid unsteady share prices, which culminating in the online retailer shedding 6% of its workforce in an effort to cut costs and create a “leaner and more focused organisation”.