Chapter 132: America in Turmoil (3)
TL: Hanguk
The Subprime Mortgage Crisis was a hot topic at school too. Of course, among the students in the Viticulture & Enology department, there was still more talk about Warren Winiarski's movements, but the real estate problem shaking all of America was no less of a topic.
On top of that, anyone whose family ran a winery or a farm had all the more reason to worry about it, and as it happened, my three friends and I were all running farms of our own.
"This looks like it's gonna get pretty serious. At least the vinegar's selling well, thank god. If it weren't for that, ugh..."
Armando shook his head.
We were sitting in the glass-walled conference room on the second floor of the student union, our usual hideout, two big pizzas in front of us as we ate lunch. By now I was thoroughly sick of pizza, but with nothing else worth eating, I picked at it with a sour look on my face.
"You're fine, though, right? Your liquor sells well."
At Armando's question, Jacob smiled awkwardly.
"Luckily, yeah... but I think I just got lucky. Brian makes the liquor really well, and since it's not expensive stuff, it doesn't seem to get hit much by the economy."
The profit per bottle was small, sure, but considering the size of the distillery, the earnings had already blown past expectations. The dividend income alone that I'd earned through Jacob's distillery was already over 500,000 dollars. Since that was profit after paying back the initial investment, it told me exactly how much money Jacob's distillery had been pulling in from late last year through this year.
"I'm jealous..."
With earnings like that, it was no wonder Armando was envious.
"Still, you're making a decent amount off the vinegar yourself."
"If I weren't, I'd be in real trouble."
If it had been wine, he would surely have struggled quite a bit through this Subprime Mortgage Crisis. Wine had to be aged for at least a year, so recouping the money would take until November at the earliest, or roll over into the next year at the latest. But because it was vinegar, sales started coming in from May, and by August there was practically none left in the warehouse.
Armando, for all his envy, had earned a considerable amount himself and paid down a good chunk of his debt with it, so he was able to ride out a crisis like this one without too much trouble.
"How about you?"
This time Armando turned to Chloe. Chloe, who had been eating her pizza daintily, blinked her big eyes and gave a shrug.
"Me? Well..."
"Oh, the cherry money starts coming in from May too, right?"
Chloe chewed, swallowed the bite in her mouth, and said,
"It's not like there's no damage at all, though. Especially since I converted the tomato farm into a pear farm and took it over from my dad. Some of it's at a fixed rate, but part of it's variable, so the interest shot way up, and the ridiculous thing is, diesel and fertilizer prices are climbing too, so the costs are going through the roof. The only saving grace is that our cherries taste better and look nicer than other people's, so we get a good price for them. If it weren't for that, it'd be really rough."
"Yeah? Other cherries aren't selling?"
Chloe sighed, set down her pizza, and went on.
"Don't even get me started. The wholesale market is completely falling apart right now. Looks like the wholesalers and processors have run dry on cash. You can really feel how much the trading volume has dropped compared to last year. Watching the cherries other farm owners bring in, it seems like a third of them go unsold and just get hauled back home."
"Wow... that's something."
"And even the stuff that does sell, a lot of buyers are asking to push the payment back three months. Most of your vinegar goes to the big supermarkets and department stores, right?"
"Yeah, it does."
"That's probably why you haven't really felt it yet."
Thinking back to the Chloe of a few years ago, it was obvious how completely she'd changed. The way she discussed wholesale cherry prices and the cost of diesel and fertilizer, she was every bit the farmer now.
"I've been feeling the diesel and fertilizer hikes myself... but the wholesale market's that bad, huh?"
"Yeah. I'm lucky my operation isn't small and I've got steady sales channels, but for the little farms without much capital, they say it's a real crisis. There's more than a few of them borrowing money because their credit lines got cut off out of nowhere. We've already had three or four people come to my dad at our place."
"Ah... that's serious. Come to think of it, I'm really glad I listened to you and started making vinegar."
Armando, looking relieved, patted me on the shoulder.
"If you're that grateful, can we eat something other than pizza next time?"
"Then why don't you open a restaurant yourself? I'm sick of pizza too, but this is about the only thing around here worth eating."
"...Haah, the food here is salty, sweet, way too heavy. People eat nothing but this stuff, that's why everyone puts on so much weight."
"Right. Korean food is really delicious."
Armando looked at Chloe, who had suddenly cut in, and started teasing her.
"Oho, sounds like you've been eating a lot of Korean food lately?"
"Not super often or anything... but when I go over to Brian's place sometimes, his mom makes it for us."
"At this rate you'll be cooking Korean food yourself before long?"
"Why not? I've got a knack for cooking, you know."
"Mm-hm~ keep this up and you two'll be moving in together soon?"
Just as Chloe and I both glanced away, someone knocked at the conference room door. Through the glass wall I could see a cute girl with a short bob standing outside. Jacob, who was closest to the door, opened it, and she stepped in shyly and spoke to Armando.
"Sorry to bother you. My mom asked me to, so... I was wondering if I might be able to get some vinegar?"
"Vinegar? A lot? Ah, hold on... let me just talk to you for a sec..."
With a smarmy grin, Armando set down the pizza he'd been eating, gave his hands a quick wipe with a napkin, and led the girl out.
"This pizza was already bad, now I really can't stomach it."
"Armando's really got a gift. I'm kind of jealous of that side of him. Anyway, I'm done eating, so I'll head out. I've gotta get back quick."
Jacob, a big guy who'd polished off almost an entire pizza on his own, rose from his seat. With the distillery so busy, it was only natural he had to get moving the moment class ended.
"Yeah, go on."
Once even Jacob had left, I stared blankly at the leftover pizza for a moment, then turned to Chloe.
"When's your class?"
"Mine's in an hour."
"Then should we go out to eat?"
"What are we getting? Buy me something good."
Chloe looked at me with bright, eager eyes, brimming with anticipation.
"Hmm... steak? You know Mason's Chophouse, right?"
"Yes! Let's go, quick!"
Honestly I wasn't all that hungry, and I wasn't even craving steak, but I took Chloe and headed off campus anyway. Driving with the top down, the warm breeze on my face, I felt almost grateful to that girl who'd come looking for Armando.
Meanwhile, over at Silveroak Hills Vineyards.
Elowen Pike sat in his office, looking down at a single sheet of paper. His face was set so gravely that his expression alone made it clear the document was causing him serious trouble.
【European Distributor — Contract Termination Notice】
It was an official notice terminating the contract for 30,000 cases of export volume. Only a month earlier, the European distributor had been discussing an extension, and yet the moment the Subprime Mortgage Crisis hit, they were the first to cut off contact. Counting the additional cancellations that had come in through today, 60% of the total export volume had been terminated.
Elowen bit his lip.
"...It's come to this?"
It was a given that when the market soured, sales of high-end luxury liquor like wine would slump, so he'd braced himself to some degree. But wasn't this too much?
The trouble was that this was only the beginning.
"Elowen! The bank... this whole thing is spiraling out of control."
Tom, the partner manager, came through the door and held out a blue file. In his early forties, Tom was both a longtime partner who had built up Silveroak alongside him and the winery's Winemaker.
【Loan Rate Adjustment → New Effective Rate: 10.25%】
As Elowen looked over the file, his eyebrows quivered.
"Are they insane? How does it go from 4.8% last year to...?"
Tom spoke, hollow, a look of despair on his face.
"The banks are scared stiff. The whole credit market's frozen, so forget new loans, they're re-screening all their existing borrowers too."
At the increasingly hopeless news, Elowen drew in a slow breath. The wine industry's real weakness wasn't its flashy labels or its premium brands.
The real weakness was the structure itself, the way money stayed tied up for at least a year, from growing the grapes to fermentation, aging, and finally shipping. The money that had to be kept circulating in the meantime ultimately came from loans, and a spike in interest rates meant the very heart of the winery was being squeezed dry.
He absently laid his hand on the map of California spread across his desk. His vineyard, marked with a triangle on the map, was, ironically enough, on track for the finest Cabernet Sauvignon in its history this year.
"How ironic... that we go under in the very year the wine's at its best."
Tom hesitated, then spoke up.
"Elowen... two of the staff, Isabella and Bolton, have left. Said they found positions elsewhere. And with the paychecks falling behind, even worse rumors are starting to spread."
"Haah..."
He pressed a hand to his head. This place was thirty years of history, inherited from his father and cultivated by his own hands. A place that had held fast to a serious, classic Napa-style Cabernet. But now all of that tradition was trembling before a single phrase: a liquidity crisis.
"How many cases of inventory do we have?"
"All told, more than 40,000 cases."
"This is maddening..."
It was the moment inventory turned from an asset into a liability. If it didn't sell, every one of those cases would become a weapon throttling the vineyard with warehouse fees, insurance, and interest.
Tom carefully went on.
"Listen... maybe..."
"Hm?"
"I'm not saying we have to, but there's a rumor that a few other vineyards are about to go up for sale. Probably ones in worse shape than us."
"And? Don't tell me you're saying we should hand over the vineyard and winery?"
Tom stepped closer to Elowen Pike and spoke gravely.
"You need to think this through carefully. Right now the long-term debt alone is over a million dollars, and the short-term liquidity debt is close to another million."
"Haah, going on that Judgment of Paris TV show last year came back to bite us."
Thanks to that show, Elaina had become a celebrity, and clearing out the wine piled up in the warehouse had vastly improved the struggling vineyard's situation. The problem was that they'd used the money to pay off only the most urgent loans, then spent what was left buying up grapes.
"Yeah. We never should have gone and bought grapes to make wine just because other vineyards were doing it... but who could've guessed it would turn out like this?"
Elowen clenched his teeth. Redwood... having watched the wine that place made from grapes bought in Sonoma and elsewhere become a smash hit, he had gone and done the exact same thing, buying up grapes to make his own.
He'd been certain that wine riding on Elaina's popularity would sell every last bottle, but he never imagined a global financial crisis was on its way.
"All in, the debt comes to two million dollars. If the bank seizes the winery and puts it up for auction, it'll go for next to nothing."
"Dammit..."
"So wouldn't it be wiser to hand it over now, before that happens?"
Elowen couldn't believe that thirty years of effort could vanish this pointlessly.
"Do we really have to do this?"
"Right now, with the grapes still on the vine, might actually be the best time. If sales still don't come in by the time the harvest is over and the aged wine is ready to ship, then the moment we have to run the tanks again, the debt's going to snowball."
Feeling utterly lost, Elowen leaned back and closed his eyes.
"Ah..."
"Maybe... we should be praying the vineyard even sells at all. Because if it won't sell... the place we end up might not be the auction house, but the courtroom."
Tom's words, realistic and yet utterly bleak, dragged Elowen's spirits all the way down to rock bottom.
*****
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