Whisky Distilleries Are Using Casks as Collateral for Loans
While a new trend in Japan, the idea actually dates back to pre-Prohibition America
If you haven’t heard, whisky is a solid investment. So much so that distillers are now using casks as collateral for loans.
Per Whisky Critic, distilleries in Japan are now allowed to use casks of whisky as financial collateral, in the same way that real estate, buildings and fixed deposits have been and are still being used. The most recent example is Tsuzaki, a distillery that was able to secure a $680,000 loan through Sumitomo Mitsui Finance and Leasing, a bank that had been pitching the whisky barrel concept for a while.
And it makes sense. “Casks of whiskies start at an extremely low value during the maturing process,” says Whisky Critic’s Warner Williams. “At the end of the process, the value increases. This makes it equal to, or even better than real estate. Its worth is guaranteed to increase.”
It’s not exactly a new practice, though, or one that’s limited to Japan. In the early 20th century, banks accepted whiskey as collateral on business loans, and with whiskey aging in government-supervised warehouses, there was an additional assurance about the safety and long-term value of the commodity. The problem? So many bank loans were backed by spirits, Prohibition threatened to make them worthless. So warehouse receipts were issued, and those were eventually bought for a pittance by a few companies that bet heavily on the repeal of the unpopular amendment.
That bet paid off and shaped the entire modern American whiskey industry. “With Prohibition repealed [in 1933], the distilling industry was in the hands of a few dominant players,” notes Whisky Advocate. “This small handful of speculators became powerful and affluent leaders of American whiskey over ensuing decades, and may well have provided some cover for the American banking industry in the process.”
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