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Thread: Stormhoek - own a vine

  1. #1
    just me duncan drennan's Avatar
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    Stormhoek - own a vine

    Stormhoek Wine's has built an excellent brand via blogging, and alternative media, but it seems their ship has hit some troubled times. They have also now come up with an idea to get out of this.

    When the crunch came in December 2007, R6 million ($800 000) was owed to South African suppliers. The list of unpaids includes the Stormhoek vineyard, the Stormhoek home cellar and in particular, the whole out-sourcing network (label printers, transporters, too many to mention).

    One thing about bankruptcies. The money is lost.

    South Africa’s wine industry is not rich. Household income, averaged out across every employee: boss, labourer, supervisor, receptionist, driver, manager, foreman, all of them, is less than R2500 per month.

    None of these businesses can afford to lose R500 000.

    As a result, all of the dozen or so businesses will have to decide about cutbacks: if, what, when and who.

    You can help. You can own a vine
    ______

    Put R2000 ($270) into a special Stormhoek fund, based in Mauritius (SA account now available too)
    ______

    From March 1, we at Stormhoek will contribute 5% of the production cost to a loan-repayment fund, to repay your loan with interest. When the fund has reached the target, all loans will be repaid.
    You can read the whole "Own a vine" story on Stormhoek's blog. What is confusing me is Stormhoek's relationship with Orbital. They seem to be a parent company for Stormhoek.

    So what do you think of this: brilliant strategy to get out of a bad situation, or clever ploy to pay off final debts?
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    Moderator IanF's Avatar
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    Quote Originally Posted by dsd View Post
    So what do you think of this: brilliant strategy to get out of a bad situation, or clever ploy to pay off final debts?
    Duncan
    They say "The repayment scheme

    From March 1, we at Stormhoek will contribute 5% of the production cost to a loan-repayment fund, to repay your loan with interest. When the fund has reached the target, all loans will be repaid."
    This looks like throwing good money after bad decisions. What is their definition of production costs. I would have thought 5 % of sales would be better. What is your upside if you put money in a R4000 bottle of wine.
    My advice unless you have inside knowledge this will work don't do it.
    Only stress when you can change the outcome!

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    just me duncan drennan's Avatar
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    I don't think that they are trying to get people to give money as an investment. I believe they are trying to use the excellent relationship that they have built with their customers (and a bunch of other people) to keep their company alive (or at least, to keep the employees that they care about).

    They are appealing to the emotional side of people, not their investment sense.
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    Bronze Member Karenwhe's Avatar
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    My only question is why is the account in Mauritius and why under a complete different company name? I have a few ideas why, but still, I wouldn't do it because of my assumptions to this setup.

    Generally speaking, it should be viable if a lot of money is at stake to make arrangements with the suppliers and customers similar or resembling to what is being done under chapter 11 (protection for rehabilitation in the US) usually done for a short period (a few months up to one year) and evaluated during the period if it is working if it is not working then of course it may not work even if others/outside give money to the company, it would only prolong a bankruptcy unnecessarily.

    The people who are owed money have more interest in saving the company than those that have nothing to do with this and may see it as a risky situation.

    Maybe who could help them is a good Turn-Around Executive. Imho, they probably have a better chance this way that just getting money.

    Big money/company example was Lucent in 2001 that went chapter 11 and was saved by its own customers e.g. BT (british telekom and others) as they needed their equipment, they made a lot of orders paid in advance with some arrangements so that they can start going back on track, the suppliers also accepted some agreements under the conditions and all turned out well in those 9 months (I have no idea what is going on right now or after that).

    Lucent made a few mistakes in their fiber optic division (and some purchases) that they couldn't sell later and all off the sudden ran out of money. When they wanted to sell their fiber optic manufacturing divisions, no one wanted the brick and mortar only R&D knowledge and they couldn't raise money fast enough.

    That is my 2 cents of course.

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    Site Caretaker Dave A's Avatar
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    OK. So Orbital, a UK company apparently distributing Stormhoek's wine, goes to the wall and the unpaid South African suppliers face financial ruin. To repair their damaged cash flow, they are going to raise twice what they lost and repay it over an undefined period at an unspecified interest rate. Their "security" for each financier is a vine. Whether that vine is or is not already preferentially secured elsewhere would be my first question.

    It's kinda like a debenture, I guess - but without the financial disclosure so that you can assess just how much security/risk you're actually getting in the deal. Raising the extra R 6 million at a far better interest rate than they could get locally was a shrewd move too.

    It's creative genius alright. Whether the promises will be honoured? No idea. But I suspect enough folks will look at the photos and reach for their chequebook anyway.
    The trouble with opportunity is it normally comes dressed up as work.

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    Email problem RKS Computer Solutions's Avatar
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    It might be creative genius, but what would the FSB say to this? Have they gotten the right financial advise in regards to taking people's money?

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    Site Caretaker Dave A's Avatar
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    Methinks they've got this covered with the off-shore company and account in Mauritius.

    This one comes down to the character of the people. On the evidence so far, there is no security. If they want to run with the money, there's not much to stop them other than their conscience.
    The trouble with opportunity is it normally comes dressed up as work.

  8. #8
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    This one comes down to the character of the people. On the evidence so far, there is no security. If they want to run with the money, there's not much to stop them other than their conscience.
    I reckon that the people who are involved are planning on sticking around, rather than some other shenanigans (personal opinion). They are sitting on a farm in Wellington which probably has a pretty big value (bigger than the amount involved).

    What is really interesting is the relationship with their clients. Think about how this would normally go down. Upstream company owing a big chunk of change goes poof. All the downstream companies sit with a huge debtors book. They have a couple of options: go bankrupt, ask investors for money, ask the bank for money.

    Now in this situation Stormhoek has built a whole lot of good will with their clients, who are willing to give them bridging finance. Not because it is a good investment, but because they love the product and want to keep it alive.

    The internet changes things.
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