‘More than 700 Nant investor barrels have never been filled’

10 March, 2017 by TheShout

By Andy Young

Earlier this week TheShout reported that the proposed takeover of the Nant Distillery by Australian Whisky Holdings (AWH) has been terminated.

Advertisement

Initially the Nant Group claimed that it was still the owner of the Nant trademarks, barrels and the Nant barrel investment scheme. However, by making those claims AWH has said that Nant has breached various confidentiality obligations and has now published the details of the due diligence audit it conducted into the business and in particular into the barrel investment scheme.

That scheme saw Nant offer investors the opportunity to buy two 225-litre barrels of Nant single malt whisky for $30,000, which would then be bought back by the distillery upon maturation, at 9.5 per cent interest, compounded annually. With bank interest rates so low, the investment proved a popular one, in particular for a lot of self-managed super funds. But the news for investors this week from AWH is not good.

AWH’s CEO Chris Malcolm said that as part of the company’s due diligence it undertook “the most extensive audit of whisky stock that has ever been done in the history of whisky distilling in Australia”. 

The audit was conducted by independent contractors and was then signed off by external auditors and as part of the audit the contractors: checked every barrel number; weighed every barrel; alcohol tested every barrel; colour tested every barrel; taste tested and retained a master sample. The julian and fill dates for every barrel were also checked.

As a result, AWH said that it discovered “a number of serious anomalies and some minor ones".

Revealing the details of the audit in a letter to investors, Malcolm said: "There have been more than 700 barrels sold to barrel investors but the barrels have never been filled with whisky and are not there. There are many more than this number still unfilled.

"There are a large quantity of barrels which have been decanted, bottled and the proceeds sold however the barrel investors have not been informed or paid. These barrels have then been filled with new make whisky so that they are full but the whisky is young and not aged in line with the barrel investors purchase dates.

"There are some barrels that after decanting were not refilled."

Malcolm also revealed that a large number of barrels are filled with alcohol with an approximate ABV of 45 per cent, well below the industry standard of 63 per cent.

"This whisky will take longer to mature and develop complexity thus not maturing when investors thought it would in the normal range of four to five years and will be of a much lesser value to barrel owners," Malcolm said.

He also said: "Filling dates (therefore reflects maturity of whisky) the julian dates listed, fill dates and actual fill dates have many discrepancies. Generally whisky was filled much later than it should have been thus the whisky is generally, much younger than investors anticipated. 

"There was a significant quantity of barrels that had the owners’ names and barrel numbers sanded off the barrels."

Malcolm added that a lack of management control meant that a number of barrels had been leaking and those problems had not been rectified.

While the details of this audit could prove to be a blow to Australia’s developing whisky industry, AWH is looking to soften that by saying that it is committed to honouring the barrel investment agreements and buying back the barrel investor barrels subject to its due diligence and audit.

AWH had agreed to buy Nant for $5.5m, which included $3m in cash and taking responsibility for the company’s debts. In December Nant’s founder and CEO Keith Batt applied to put himself into bankruptcy, owing over $16m and the company behind his former property portfolio, Queensland Property Partners is also being liquidated, owing over $20m.

TheShout has contacted both Nant and AWH for further comment.