Bain, Sona in line for big win on wine firm hurt by China tariff

BAIN Capital and Sona Asset Management stand to reap a hefty reward from their potential takeover of a severely distressed wine company after the firm’s sales outlook got a boost from improving relations between Australia and China.

Bain and Sona are set to gain a controlling stake in Accolade Wines from Carlyle Group as part of a debt-for-equity swap, after scooping up the Australian wine seller’s deeply distressed loans on the secondary market, according to sources familiar with the matter, who spoke to Bloomberg on the condition of anonymity.

The loans, which dropped to as low as 30 pence on the pound sterling, have rallied about 15 pence since mid-October and are now quoted at 45 pence, according to pricing source BVAL.

The two funds lead a bigger group of creditors set to get equity in the company, the sources familiar said.

Accolade Wines, which built its business model around exporting wines to China, has been in the doldrums since President Xi Jinping’s government introduced tariffs of up to 200 per cent on wine imports from Australia three years ago. A gradual improvement in relations between the two trading partners over the past 18 months culminated last week in face-to-face talks between Chinese Premier Li Qiang and Australian Prime Minister Anthony Albanese.

China said after the meeting that it was prepared to strengthen communication and deepen trust, while Australia emphasised that it was important for export restrictions to be removed. Trade curbs have already been lifted on barley, coal and timber and China signalled last month that it was also prepared to review the wine tariffs.

Accolade has struggled to replicate the revenue stream it gets from China in its other markets, which include the UK, and with deadlines on £380 million (S$641 million) of sterling and Australian dollar denominated debt fast approaching it has begun restructuring negotiations with its lenders.

Representatives for Bain, Carlyle and Sona declined to comment.

Besides possibly increasing demand for Accolade’s own wines, the lifting of tariffs could have a “positive impact” on pricing in the Australian wine market as a whole after recent years were impacted by oversupply, said Joao De Almeida Marques, an analyst at Moody’s Investors Service.

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He added, however, that volumes may not immediately return to early 2021 levels because “customers in China have had to find alternatives to Australian wines”, while Accolade has unwound its investments in China. BLOOMBERG