California wine industry crisis: Signorello faces foreclosure, Gundlach Bundschu files for bankruptcy

The developments underscore the pressure facing wine producers that took on significant debt when the wine market was expanding.

California’s wine industry is confronting a deepening financial crisis, with two long-established, family-owned wineries facing severe financial distress amid falling demand, mounting debt and tougher lending conditions, according to the San Francisco Chronicle.

Napa Valley’s Signorello Estate is reportedly facing foreclosure and is scheduled to be auctioned on October 2, while Gundlach Bundschu has filed for bankruptcy. The developments underscore the pressure facing producers that took on significant debt when the wine market was expanding.

Debt built up during better times

According to the San Francisco Chronicle, both wineries took on tens of millions of dollars in debt at a time when California wine sales and property values were growing.

Signorello obtained financing in 2018 to rebuild its winery after the 2017 wildfire destroyed the property. The rebuilt facility was significantly larger and more elaborate.

Gundlach Bundschu borrowed in 2020 to purchase a 60-acre winery estate for Abbot’s Passage, a separate brand aimed at younger wine drinkers. CEO Jeff Bundschu described the acquisition in bankruptcy documents as an investment intended to create a platform for long-term growth.

But the market changed dramatically. The pandemic disrupted winery hospitality, wildfires damaged much of California’s 2020 wine vintage, while construction costs and production expenses increased. The industry then entered a prolonged period of declining demand.

The result has been a mismatch between debt accumulated during a period of growth and the cash flow available to service it.

Higher borrowing costs add pressure

The wineries have also pointed to increasingly difficult relationships with lenders.

Signorello owner Ray Signorello said American Ag Credit raised the interest rate on his borrowing from 4.75% to 12.6% over six years. Gundlach Bundschu’s largest loan, acquired by asset manager Tiverton in 2023, carried an interest rate of 14.75%.

The San Francisco Chronicle cited wine-industry mergers and acquisitions advisory firm Azur Associates as saying starting interest rates for wine-industry loans rose from below 4% in 2021 to between 6% and 8.5% in 2026.

The combined debt owed by the two wineries to American Ag Credit exceeds $50 million.

Fewer buyers, falling asset values

Both wineries sought potential buyers or partners after taking steps to cut costs.

The Bundschu family reduced its workforce by nearly 40%, sold non-company real estate and put its family home up as collateral. Both wineries received offers they considered competitive with current market values, but their lenders rejected the proposals because they were below the outstanding debt.

As a result, Gundlach Bundschu entered bankruptcy proceedings, while Signorello faces an October auction.

The downturn is also making acquisitions harder. With major industry buyers reducing their activity, declining asset values and weaker demand are leaving heavily indebted wineries with fewer options.

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