Naked Wines not expecting to incur loss from SVB exposure

Naked Wines said on Monday that SVB is the administrative agent and issuing lender for its $60m asset-backed credit facility, but that day-to-day operations are unaffected by the collapse of Silicon Valley Bank and it does not expect to incur a loss.

The company said it holds cash with SVB in a number of accounts in the US and UK and that the $60m facility is syndicated 50-50 between SVB and Bridge Bank and remains "an important part" of its financing arrangements.

"While the situation remains fluid, our contractual assessment to date shows us having less than £0.6m of cash which we considered, prior to the US Treasury Announcement referenced below, to be at risk and potentially uninsured due to the closure of SVB," the company said.

It noted that £14m is held in a cash sweep account under which SVB acts as custodian for third party money market funds. 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.

"As a result the group should be entitled to a return in full of those funds after completing any procedures required by the FDIC," it said.

Naked Wines also said that FY23 trading is consistent with the guidance provided in January.

Chief executive Nick Devlin said: "We are announcing today that day to day operations are unaffected and we don't expect to incur any loss as a result.

"Whilst this situation remains 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."

Jefferies, which rates the shares at ‘buy’, said: "The fallout from SVB is certainly unhelpful for Naked Wines, but we see limited risk to the group's cash deposits.

"Crucially, trading continues to be consistent with the guidance laid out in January, which had required no additional draw-down on the $60m facility - in reality, we see the remainder of the facility as providing protection for downside trading scenarios that have not come to pass.

"There is sufficient cash to manage the business in the near term, and we would expect, with the group a much more bankable profitable proposition than in the past, new financing to be negotiated."