9th March, 2017 by Amy Hopkins

Australian Whisky Holdings (AWY) has discovered that more than 700 whisky casks sold under Nant Distilling Company’s barrel investment scheme “have never been filled and don’t exist”.

Earlier this week, it was revealed that AWY’s AU$3 million takeover of Tasmanian whisky producer Nant had been partially terminated.

While AWY completed the purchase of the historic Nant Estate last month, allowing the company to release products under the ‘Nant’ label and continue to operate Nant’s barrel management and investment schemes, the companies did not complete their Business Sale Agreement.

The agreement was terminated, meaning private equity group AWY will not manage the Nant Distillery on behalf of parent company The Nant Group and will instead commence its own distillery operations on the Nant Estate.

Keith Batt, founder of The Nant Group, filed for bankruptcy in February this year. AWY was set to take on AU$5.5 million worth of Nant debts and liabilities, after due diligence.

In a letter to investors, Chris Malcolm, CEO of AWY, said that Nant had not “satisfactorily addressed” a number of issues during the acquisition negotiations, including AU$1m owed tax.

Malcolm also said that as part of AWY’s due diligence process, the company had conducted the “most extensive audit of whisky stock that has ever been done in the history of whisky distilling in Australia”.

As part of the comprehensive assessment, the firm said it discovered that “there have been more than 700 barrels sold to barrel investors but the barrels have never been filled with whisky and are not there”. AWY estimates that there are “many more of this number still unfilled”.

‘Difficult phone call’

“Today it was my deeply sad duty to inform one of the barrel owners that the barrels he had invested in have never been filled and don’t exist,” Malcolm said in the letter sent to investors on Tuesday this week.

“You can imagine how difficult this phone call was for both of us. There are many more of these conversations unfortunately yet to come.”

Malcolm said that AWY offered Keith Batt and his associates a “very competitive price” to fill the “non-existent” barrels once the audit was completed, but said Batt turned down the offer.

The audit also discovered that a “large quantity” of barrels have been “decanted, bottled and the proceeds sold”, but barrel investors “have not been informed or paid”. Once the barrels were emptied, they were refilled with new make spirit, “but the whisky is young and not aged in line with barrel investors purchase dates,” AWY said.

Some barrels were filled with approximately 45% abv spirit, when the industry standard is 63%, filling dates had “many” discrepancies, owners’ names had been sanded off some barrels, and other casks were leaking, according to AWY’s audit report. However, AWY said it “remains committed” to buying barrels back from investors

Nant part-funds its whisky production through the barrel investment scheme, run under Nant Barrel Holdings.

The scheme allows investors to purchase two barrels of Nant Tasmanian Highland Single Malt for AU$25,000, with a guaranteed 9.55% annual return. Under the agreement, Nant buys the casks back for AU$36,007 after four years of maturation.

AWY said it was making investors aware of the full transaction and audit details after Keith Batt breached AWY and Nant’s confidentiality agreement on social media.

The Spirits Business has approached Nant Distilling Company for comment.