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A Cellar Full Of Collateral, By The Bottle Or The Case

By   /   August 17, 2015  /   No Comments

Original article found on nytimes.com

As a restaurateur and wine collector, Nick Gangas knows the special pleasures of pairing a fine Burgundy with a roast chicken or a leg of lamb. Yet recently, he discovered another use for his Burgundy — as loan collateral.

Like a growing number of collectors, Mr. Gangas has pledged some of his finest French wines for large cash loans with generous terms. Using $300,000 worth of his Domaine de la Romanée-Conti, Chambertin and other wines, he’s about to receive a loan of about $150,000, which he plans to use to open a new restaurant in the Chicago suburbs.

The bottles “would be just sitting in the cellar aging,” said Mr. Gangas. “Why not use them to raise capital? By the time they’re ready to drink, I’ll have paid back the loan.”

For the wealthy, wine has become the ultimate liquid asset. With prices for top vintages soaring past $10,000 a bottle, fine wine is being bought, sold and traded at auction like a new investment class, with its own value indexes, investment funds and speculators. And now wealthy collectors are using wine as leverage — raising cash to invest in more wine and create even more wealth.




Domaine employees taking inventory of a client’s wine collection. Some collectors are using their trophy vintages as collateral for loans, often to buy more wine.CreditWhitney Curtis for The New York Times




A new crop of wine lenders has started offering collectors cash for up to 60 percent of the value of their collections, with relatively low interest rates. A collector with a $1 million collection can obtain a $600,000 loan, often at an 8 percent to 10 percent interest rate — or a fraction of the average credit card rate. In the last two years, wine lenders have issued tens of millions of dollars in loans with wine as the sole collateral, according to several lenders.

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