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Bankruptcy and Unanswered Questions – Disturbing Whisky Investment News — Dramming

Bankruptcy and Unanswered Questions – Disturbing Whisky Investment News

by Oliver Klimek on February 8, 2016

Whisky investment has been the topic of a number of articles on this blog, and it is no secret that I am not a fan of it. Investment in collectable bottles in particular has been driving up whisky prices not only on the secondary market but also in retail. Last week two different news related to whisky investment hit my inbox and they don’t sound very promising.

Apart from bottled whisky there also is another form of whisky investement that is potentially less dangerous for the market in general: Cask investment. Some distilleries have been offering freshly filled casks to investors directly, but now there are also investment companies that offer this service.

While whisky cask investment may not have a huge effect on the whisky market, it is a tricky thing from the investors’ perspective. This is not a regulated form of investment, so investors might face substantial risks.

Will Nant Whisky investors get their money back?

47d80592b6888b714f7a23e57804441a_Nant_Distillery_LogoNant Distillery in Tasmania has been offering cask investments at AU$25,000 for two 225 litre casks with a guarantee to buy them back for AU$36,007 after 4 years of maturation. This is the equivalent of a 9.55% compound interest, an offer which sounds almost too good too believe.

Now there are reports that investors are having trouble to redeem their casks. This news is not made easier to digest by the fact that Keith Batt, the founder of Nant, has filed for bankruptcy with over $16 million of debt. Also his previous company, a property development firm, has declared bankruptcy owing over $20 million.

Keith Batt has built a small empire around Nant Distillery from bars and restaurants to a luxury yacht, and you can not only invest in whisky, there is also a Nant farm raising Angus cattle for investors.

As it looks, the money collected from investors was used to build this empire, but apparently there has not been sufficient revenue. Now $12,500 for a cask of newmake sprit is an ambitious price, and logically the whisky can not be cheap. A 500 ml bottle costs AU$150. At such a price people think twice about buying a bottle of 4 year old whisky.

With an unregulated investment like cask whisky investors should make sure that a guaranteed buy-back price is really guaranteed, even if the business fails.

Fairfax Whisky – Ultra-discreet or scam?

I received a press release from an investment company called Fairfax Whisky that left me puzzled:

Fairfax-Whisky-investmentUNITED KINGDOM – 01/29/2016 – Today Fairfax Whisky publicly unveiled it’s much anticipated whisky investment service. The announcement comes at a time when whisky investing is growing in popularity among leading investors. Fairfax Whisky has employed the world’s leading whisky experts to provide unparalleled insight and market research to the broader investment community. The firm helps educate investors about the whisky industry and various investment types available.

“Fairfax Whisky is dedicated to helping investors understand investment-grade whisky and its place in a diversified portfolio” said the chief executive officer of Fairfax Whisky. “Whisky investing has existed for centuries, but has been limited to insiders. With the launch of Fairfax Whisky we’re giving all investors access to this lucrative opportunity.”

Fairfax Whisky extends a family business which has marketed rare antiques and collectibles since 1957. The management team has a long ancestry in whisky, providing deep understanding of all aspects of the industry. Headquarters in Glasgow, Scotland and subsequent offices in Hong Kong and Philippines are at the heart of the high-end whisky industry offering investors access to the best whisky in the world. The Fairfax Whisky team is passionate about whisky. This passion has resulted in a large network of clients, hotels, auction houses, restaurants, luxury brands, retail shops and collectors from all over the world.

Fairfax Whisky offers access to the largest stock of casks and rare bottle collections of both Scottish and Japanese whisky. They work with clients in finding and securing the best investments based on their budget and individual objectives.

I don’t know if I am overly sensitive, but a couple of things make me wary here. Firstly, the chief executive officer of the company is not named which is quite unusual. Usually whisky investments are advertised by “real people” who use their expertise as personal branding. Probably the best example is former Dalmore manager David Robertson who is very prolific in this field.

Even more puzzling is that there is no company information about Fairfax Whisky whatsoever in the many online business directories, neither is the legal status of the company mentioned on the website. All we get is an anonymous CEO and a back story. Speaking of which, the history leaves some questions open.

According the the press release the family is said to be in business since 1957. But this is the “About” text from the website:

Fairfax Whisky started taking root more than a decade ago, extending a family business specialized in rare antiques and collectibles since 1962. Our Scottish and Japanese origins, insider whisky knowledge and extensive connections established our company as the foremost experts in rare whisky. But, our story doesn’t end there…

While visiting Scotland in 2005, our founders saw hundreds of casks aging in the cellar of a distillery. They had seen casks before, but on this occasion they saw an opportunity. While whisky is contained in a cask it continues to age, appreciating in flavor and value until it is bottled. After bottling, the maturation process stops. This creates an interesting dynamic for an investor, cask whisky is an asset that naturally continues to increase in value as it ages. The problem was that investing in casks was limited to insiders, dealers and large institutions. There were only a select few with access to this lucrative industry.

On that pivotal day in Scotland, the founders of Fairfax Whisky decided this must change. Fairfax Whisky set out to challenge these long-standing conventions and give investors worldwide access to investing in cask whisky.

Now it’s 1962. And the whisky business supposedly is 10 years old, but is officially launched only now. But why then is there “ESTD 1988″ in the company logo? My emails asking for clarification and the name of the CEO have not been answered as of today.

But that’s not all. The Fairfax Whisky website lists three offices in Glasgow, Hong Kong and the Philippines. The Glasgow address is given as Regent Street, but without a number. The Hong Kong address is an office complex that prominently lists offers for “virtual offices” for a small montly fee so that you can have a street address even if you don’t have a physical office. And the address in the Philippines is a hotel.

Each point on its own isn’t a big deal. But in combination they leave so many question marks that if I were a potential investor, I would think twice about handing over my money.

{ 4 comments… read them below or add one }

Frank Murphy February 8, 2016 at 3:48 pm

If your first communication with prospective customers isn’t clear about what you’re doing, who you are and where you come from, I wouldn’t use yours to touch it. This sounds like a bunch of shysters trying to cash in on a boom. These worms always come to the surface near the top of a market to cream off a bit before the eventual turn.

I wouldn’t give them the vapour rising from my micturition.

Reply

raf February 8, 2016 at 11:49 pm

Checking their domain registration is also amusing. The company they are using to hide their identity (even from the registrar) is in Panama, a country that has (coincidentally) been associated in the past with misleading whisky companies. Getting a registrar to hide your identity from the general spamming public is one thing but hiding your identity from the registrar itself seems highly dubious. And of course it was only registered just over two months ago (2015-11-26).

I think it’s safe to say that you are not being overly sensitive.

Reply

kallaskander February 9, 2016 at 10:27 am

Hi there,

Oliver I do share your dislike for whisky as a commodity and everything connected therewith.

When news like these

http://www.thespiritsbusiness.com/2016/02/market-for-rare-whisky-exceeds-all-forecasts/

http://www.thespiritsbusiness.com/2016/02/top-10-most-investible-scotch-brands-in-2015/

http://www.rarewhisky101.com/my_media/2015_Rare_Whisky_101_Annual_Report.pdf

haunt the internet there is always someone willing to take advantage without making much effort.

Greetings
kallaskander

Reply

Bob Balaban February 16, 2016 at 4:10 am

The person behind Fairfax is Edward Davidson who was caught up in Australian Wine Index debacle. Company formed in June 2015. I wouldn’t put a penny their way. Rupert Patrick and David Robertson are who I invest with

Reply

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