Matthew Higgins was driving south along Highway 29 in Napa Valley, his expression grave. Just then, a shrill ring sounded from atop the dashboard. Matthew tightened his grip on the wheel and pressed the receive button on the car phone.
“Is this Mr. Matthew Higgins?”
“It is. Who’s this?”
“This is Michael Sanders from Wells Fargo’s Corporate Finance Division. Following Lehman Brothers’ filing for bankruptcy protection yesterday, our risk management committee has made the final decision to invoke the Acceleration Clause on the cross-collateralized loans secured against Mr. Higgins’s Castello estate and the northern wineries.”
Matthew’s heart dropped. An acceleration clause referred to the bank’s right to demand that a debtor repay the remaining loan balance all at once, immediately, if certain conditions were breached.
In short, he was fucked.
“Acceleration clause? Listen, Sanders. We’ve never missed a single interest payment! What does Lehman going under have to do with our estate? We’re the Higgins family!”
“Please understand, Mr. Higgins. Lehman Brothers was the guarantor for the short-term bonds issued when you acquired the northern wineries. Their bankruptcy has caused your credit rating to plummet in real time. More importantly, we have confirmed a breach of the LTV agreement on the pledged properties. It means the market value has fallen below the principal of the loan.”
“That’s impossible! This is Oakville’s To Kalon! It’s the most expensive land in the world!”
“Yesterday’s To Kalon and today’s To Kalon are not the same, Mr. Higgins. There are no buyers in the market right now. The bank must recover its principal, and we are merely exercising the rights stipulated in the contract. If you do not deposit twelve million dollars in margin by ten o’clock tomorrow morning, we will immediately begin foreclosure and public auction proceedings on the entirety of the Castello estate, as previously notified.”
“Twelve million dollars? You lunatics! Even if you searched all of Napa right now, where the hell would anyone come up with ten million dollars in cash in a single day!”
Matthew shouted as if screaming, but all that came back was the cold tone of a disconnected call. The man named Michael Sanders had hung up as though Matthew wasn’t even worth answering.
“Damn it... damn it!”
Matthew slammed his hands against the steering wheel like a madman. This year’s wine shipments would originally have exceeded seven million dollars, but the problem was that the distributors were also reeling from the subprime crisis, and with the collapse of the wine-buying customer base, half the orders for mid-to-low-priced brands had been canceled. It was obvious that even reaching five million dollars would be a close call.
Until just a year ago, he had been filled with dreams of becoming Napa’s great conqueror. The aggressive M&A he had boldly carried out by pledging the sacred land of To Kalon, which his father Joseph Higgins had spent his life protecting. He had even felt proud of himself for persuading his skeptical father and increasing Castello’s assets by thirty percent.
But when Wall Street, which had seemed eternal, collapsed, its shrapnel flew straight into Castello Winery in the heart of Napa.
His father, who had vehemently opposed it at the time, had been unable to sleep properly ever since the heat wave dealt a heavy blow to the estate. He had to get through this crisis somehow, but the phone call from Wells Fargo just now had nearly scared his soul out of his body.
If this reached Joseph’s ears, being disowned would not be the end of it. To Joseph Higgins, To Kalon was not mere real estate, but the soul and religion of the family. To have that sacred land seized by New York bankers with foreclosure notices slapped on it would be a disgrace that put an end to the history of the Higgins family.
He hurriedly began calling everyone in his network.
[Matthew, I’m sorry, but I have to put out the fire at my own feet first. We just got a call from the bank saying they’re invoking the acceleration clause, so we’re out of our minds too.]
[Mr. Matthew Higgins, you know the situation right now, don’t you? Liquidity has completely dried up. Even the Fed can’t get a handle on it, so how are we supposed to create cash?]
Everyone shook their heads as if they had agreed to do so in advance. All of Napa Valley was being swept up in the subprime crisis. Just as despair was taking over his mind, a name flashed through Matthew’s head.
Brian Choi.
A monster who had perfectly protected the grapes across his entire estate, not only through this year’s record-breaking cold damage—the worst in a hundred years—but even through the July heat wave. His was one of the few wineries in Napa Valley likely to maintain an ordinary year’s shipment volume. At this moment, he was the only person in Napa who might be able to extend a hand of salvation.
Matthew immediately made a call. The recipient was Josh, his junior by three years at UC Davis and the heir to a small estate in Napa. His estate was close to Redwood, so Matthew wondered if he had heard anything.
“Matthew?”
“Yeah, have you heard anything about Brian’s Redwood estate?”
“Redwood? Heard what?”
“I heard rumors that it held up well even through the July heat wave. I was wondering how they’re doing this year. Everyone else is just talking like they’re dying.”
“Hah, yeah. Our estate’s completely ruined this year too. I’m even thinking of giving up on bringing in workers to sort the grapes. But Redwood is perfectly fine. I heard they’re planning to produce about the same amount of wine as last year?”
“They’ll produce it, sure. But who’s going to buy it?”
“Well... the Redwood line all has good ratings. Echelon and Sylphid... those two both won Double Gold last year. And the cult-grade one got the highest evaluation. At least I think they’ll be different from our winery. Hah, I’m jealous. I even heard they had money left over and lent some to a partner estate at a low interest rate.”
“To a partner estate? How much?”
“I don’t know the scale, but I heard it was a Cabernet Franc estate? Then wouldn’t it be Grant Estate in the Mayacamas Mountains?”
“Got it. I’ll hang up for now.”
“Huh? Wait...”
Before Josh could say anything more, Matthew ended the call. If the conversation dragged on, Josh would surely ask him for help.
“Hmph! As if you can compare some pathetic winery to us.”
Matthew muttered under his breath, mocking Josh’s estate, then soon stiffened his expression and pressed harder on the accelerator. If Brian had shown mercy to a partner, then Matthew wanted to believe he would receive an even greater welcome when he arrived carrying shares in Castello, the pinnacle of Napa. No, he had to.
Matthew passed Yountville and swung his car roughly into the entrance of Redwood Winery.
In the distance, he saw the view of Redwood wrapped in peaceful silence. All of Napa was sinking, swept up in the enormous tidal wave of Lehman Brothers’ bankruptcy, yet only that place was calm. The perfectly managed grapevines seemed to be mocking him, and the hairs on Matthew’s body stood on end.
As soon as he stopped the car, Matthew threw the door open and got out. The sky was clear, without a single drop of rain, but his shirt was already soaked with cold sweat.
---
There was no way I could be unaware that Napa Valley’s wineries were all in difficult circumstances. Some of them had even called me directly asking for help, but since we couldn’t be certain that all of our wine would sell out this year either, I politely refused.
Even so, the person who visited the winery today was far too unexpected.
“Matthew... Higgins?”
It was to the point that even after seeing his face, I wondered whether I was seeing things correctly.
“It’s been a while, hasn’t it? Two years since graduation?”
“I... suppose so. Please sit.”
At the sight of Matthew sitting down with a somewhat anxious expression, Warren quietly smiled and excused himself. As if his throat were burning, Matthew downed a glass of cold water in one go from where he sat, then stared straight into my eyes and said,
“Could you... help us?”
Of course, I had expected him to say something like this. What puzzled me was that his Castello Winery was located in the To Kalon region, so under ordinary circumstances, it should never have run into financial trouble.
“Has something happened?”
“It has. Cold damage, the heat wave...”
I knew that much. This year, natural disasters and the Lehman Brothers bankruptcy had caused wineries with management difficulties to appear one after another. I even knew that Sloan Estate, which had received 100 points from Robert Parker, would be unable to withstand its financial difficulties and be sold to a financial group in Hong Kong three years later, in 2011.
But for a winery that owned To Kalon to be scrambling for money this urgently, this very year, was truly unexpected.
“Brian... I won’t waste words. I’ll hand over a ten percent stake in our Castello estate, the eastern block of To Kalon. Put it up as collateral and immediately arrange twelve million dollars for me. I’ll give you the highest interest rate on the market.”
Matthew tried to preserve his pride by raising his voice, but he couldn’t hide the tremble at the end. He was saying he wanted to borrow money by putting up part of a block in the To Kalon region as collateral. I looked at him in disbelief.
“Twelve million dollars is one thing, but does the owner of the winery know you’re putting up an estate block stake as collateral?”
“This is just one of the blocks my father already handed down to me.”
Matthew lifted his chin with a confident expression. But the area under his eyes was faintly trembling, making it clear that he was extremely nervous right now.
“Hmm... You want twelve million dollars in exchange for collateralizing a stake... But the bank must already have a lien on that land, right? We’d be subordinated, so doesn’t that mean we might not be able to recover the funds?”
In that instant, the corners of Matthew’s eyes twitched. He must have assumed that because I only knew grapes and wine, I lacked financial knowledge. So he had likely thought that if he offered up To Kalon as collateral, I would bite immediately.
“That, that’s...”
“A deal like this gives us nothing but risk and no benefit at all. So... I’m sorry, but I’ll pretend I never heard it.”
At my cold refusal, Matthew hurriedly added,
“I’ll put up my entire estate as collateral. Even if you’re subordinated, the value of the land is higher than that. Even if there really is a problem, you’d definitely be able to recover twelve million dollars. It’s a full twenty-five acres. Twenty-five acres of To Kalon. You’d be able to get twenty million for it.”
Twenty-five acres of To Kalon, of all places, was certainly attractive... but twelve million dollars was not a small sum either.
“Hmm. I’ll think about it for now.”
“You have to decide by today.”
At the urgency in his eyes, I nodded.
“Understood. I’ll give you an answer within an hour.”
“Good. I’ll say it again, I’ll give you the highest interest rate. Just know that you’ll be making money while sitting still.”
With that, Matthew left the winery after giving me his phone number. His face was full of expectation, but in truth, I felt no appeal whatsoever in going out of my way to procure twelve million dollars just to receive interest. It would only weigh on my mind, and if a problem arose, I might have trouble recovering the funds.
I had only intended to refuse over the phone because if I rejected him to his face, it was obvious he would keep trying to persuade me... but then a memory suddenly flashed through my mind.
“Carl Icahn...”
I remembered what happened when the corporate raider Carl Icahn acquired TWA Airlines in 1985. After carefully organizing my thoughts, I called the number Matthew had left behind.
“Have you made up your mind?”
Matthew’s voice was bright, as though he was fully expecting me to lend him money with the land as collateral.
“Mm... Let’s do this.”
“Hm?”
“In any case, Senior Matthew, you’re in a situation where you have to repay the bank twelve million dollars immediately, aren’t you?”
I didn’t know why the twelve million had come up, but I asked because I assumed it was money that would go to the bank. If it wasn’t and the money was for some other purpose, I intended to refuse outright.
“Th... that’s right.”
“I will directly acquire your debt through debt assignment.”
“What? You’re going to buy my debt?”
“Yes. I’ll repay the money you owe the bank on your behalf, and from now on, your creditor will no longer be the bank, but me, Brian Choi. That should get you through the immediate foreclosure crisis tomorrow morning.”
In the severe credit crunch right after the Lehman crisis, if the debt had a risk of becoming distressed, it could be purchased at a discount of at least fifteen percent and as much as twenty-five percent.
“No...”
“Then doesn’t that mean we don’t have to repay the twelve million dollars right away?”
“I’ll give you three years. I’ll acquire the secured loan, with a three-year maturity at an annual interest rate of fourteen percent. That isn’t even the legal maximum, so I wouldn’t call it a harsh condition.”
“That’s true, but... what if we can’t pay it back?”
I answered calmly.
“I’ll enforce the security interest.”
220. Silver Oak Grapes (1)
The next day, San Francisco’s Financial District. Ever since Lehman Brothers had filed for bankruptcy, the faces of the men in suits walking these streets had all been dark.
Among them, the atmosphere on the twelfth floor of Wells Fargo, in the Corporate Finance Department, was even heavier.
“Are you Mr. Brian Choi? I’m Michael Sanders.”
A man in his late forties, looking rather exhausted, greeted me. Like a man of finance, his hair was neatly groomed and his suit immaculate, but the inexplicably anxious look about him made it clear that the mood here was far from good.
“I’ll get straight to the point. This is about the purchase of Matthew Haggins’s Castello Farm loan that you mentioned over the phone. In times like these, an offer to buy an NPL—Non-Performing Loan—in cash is certainly interesting.”
I opened my leather briefcase and answered evenly.
“I doubt it’s merely interesting, Team Leader Michael Sanders. Isn’t the directive from Wells Fargo headquarters right now to secure liquidity at all costs? With no one knowing how far the shrapnel from Lehman will fly, I imagine cash going straight into the vault is far more urgent than To Kalon land that exists only on the books.”
Sanders’s eyes narrowed. His expression said he had sensed I had struck precisely at his weak point.
“Matthew’s outstanding principal and interest totals twelve million dollars. Considering the value of To Kalon, we cannot discount even a single dollar.”
I gave a faint laugh. Before my regression, after my father collapsed, the time I returned to California was around 2011. So I knew very well how the financial industry’s mood was moving at this point in time.
“Team Leader Michael, you know better than I do that Napa AVA prices right now aren’t the same as in an ordinary year. Even if we’re talking about To Kalon. In an ordinary year, you might get eight hundred thousand dollars per acre, but now... things are very different.”
“...Wouldn’t that depend on how one looks at it?”
I shrugged.
“You’ll be moving to auction soon, won’t you? In a panic market like this, do you really think the auction will proceed properly? If you calculate two years until the final winning bid, legal costs, and the decline in asset value, the actual recovery Wells Fargo can expect won’t even reach sixty percent of the principal.”
Michael’s eyes trembled almost imperceptibly. The two-year period I had mentioned and the sixty-percent recovery of principal must have hit directly at the realistic risks the bank was facing.
At first glance, one might think an auction would hardly take as long as two years if they pushed it through immediately, but reality did not work that easily. If Matthew’s lawyers filed suit claiming there were defects in the loan documents or that the bank had invoked the acceleration clause unreasonably, the legal battle alone could drag on for more than a year.
On top of that, immediately after the Lehman Brothers collapse, a flood of foreclosed properties would pour into the market, nearly paralyzing the courts and administrative agencies. This was what would come to be called the “robo-signing” scandal, and because of this administrative overload, the actual processing time would increase enormously.
Even if the auction fortunately began, if no winning bidder appeared, the procedure could stretch on indefinitely. In the second half of 2008, no matter how good the land was, there were no buyers with cash to spend. If the property failed to sell again and again, the bank would have to keep lowering the price, and time would slip away helplessly in the process. If that happened, the value of the loan would only continue to fall.
And that was not the end of it. If it took two years to reach a winning bid, who would manage the vineyard in the meantime? The bank would have to hire a manager, and if a bank that knew nothing about farming took charge, the vines of To Kalon would either sicken and die or plummet in value.
In the end, even for a bank determined to dispose of the land it held as collateral, this tedious and complicated process was by no means a pleasant course of action.
“Mr. Brian, as the de facto owner of Redwood Winery, you are a VIP customer of our bank. So I thought we knew you quite well. It seems that wasn’t the case. Your financial background knowledge is considerable.”
“I’ve just picked up a few things here and there.”
“So, how much did you have in mind when you came here?”
“Nine million dollars.”
At the number I threw out, Michael Sanders let out an incredulous laugh.
“You want us to cut three million dollars? A twenty-five-percent haircut? That’s robbery!”
Michael spoke as if he found it absurd, but paying twelve million dollars for a twelve-million-dollar non-performing loan was something only a fool would do. If not that, it was such a stupid move it could be seen as a breach of duty.
“You know that isn’t true, don’t you? Once winter passes, how much do you think a To Kalon vineyard that hasn’t been prepared for overwintering will be worth? If the owner of the vineyard isn’t decided by April, next year’s farming is over. Its value will fall even further. Nine million dollars is a generous offer. After all, Wells Fargo is a very good financial partner to me.”
“......”
I lowered my voice another notch and pressed him.
“No matter what choice you make, Team Leader, I have no intention of pressuring you. But if you sell this loan to me, you can submit a report to headquarters before leaving work today saying you cleanly disposed of one non-performing loan and secured cash. If you reject my offer? From now on, you may find yourself in a tedious legal battle with Matthew Haggins. The money will go out as it is, and as for how much benefit you’ll actually gain...”
I knew very well how much bankers in this period hated the words receivership and credit crunch. Sanders rubbed his face with his dry hands and fell into thought.
I knew he could not refuse.
“...Nine and a half million dollars.”
Sanders spat it out in a cracked voice. It was a number that seemed meant to preserve the last of his pride. I pretended to think for a moment, then held out my hand.
“Very well. Let’s sign the loan assignment agreement at nine and a half million dollars. Of that, three million will come from my account, and for the remaining six and a half million, please issue me a new loan using this loan as collateral.”
For an instant, he froze, then gave a hollow laugh.
“Ha, no... Are you trying to get this for nothing?”
“Oh dear... It seems you don’t know because you’re not my account manager. With Redwood’s guarantee, you would be securing a new loan asset backed by Astra Vale’s revenue and the high-quality collateral of the To Kalon loan... I suspect the higher-ups would be quite pleased with my proposal.”
“...Please wait a moment.”
Michael Sanders briefly left his seat, made a short phone call with someone, and returned. On his face was an even deeper sense of defeat than before, and at the same time, a strange relief.
In the end, he gave a faint laugh and shook his head.
“Mr. Brian, are you really a winemaker? I just spoke with the division head, and headquarters has given the OK to your proposal as well. They said this was the first offer since the Lehman crisis to so cleanly convert a distressed asset into a prime asset. And I’d only heard about Redwood Winery, but when I checked, it really is impressive. To think last year’s revenue exceeded twenty million dollars...”
“Astra Vale alone accounted for around sixteen million dollars in revenue last year.”
“With sales like that, you’re probably among the top three cult wines in Napa Valley. In any case, thanks to that, my performance review has gained two birds with one stone: a successful NPL sale and the execution of a prime new loan. I can’t help but thank you.”
Sanders began typing himself to revise the contract and added to me,
“Nine and a half million dollars. Of that, we’ll approve six and a half million as a new loan at a low annual interest rate of 5.5 percent. This is in consideration of your creditworthiness and Astra Vale’s sales performance, but in a credit crunch like this, 5.5 percent is practically at the level of special approval from the division head.”
I nodded leisurely. With money borrowed at 5.5 percent annually, I would collect fourteen percent interest from Matthew. In effect, I would be pocketing an 8.5-percent interest margin while sitting still. On top of that, I had just received a discount of two and a half million dollars on the spot, so the practical benefit had increased considerably.
Of course, I did not attach much meaning to that profit itself. I had not gone through this trouble merely to play around with interest.
“A wise choice, Team Leader. Ah, and one more thing. Please treat it as if I purchased this loan from Matthew Haggins at face value. There’s no particular benefit in that friend of his learning that the bank took a loss. It doesn’t matter even if he finds out, but if it needlessly puts him in a bad mood, that would be inconvenient for both of us.”
“Of course. There’s no reason for us to let him know that. We only plan to notify him that the loan has been transferred to Brian Choi of Redwood.”
“Good.”
After finishing the contract with Michael Sanders right there where we sat, even completing the wire transfer, I arrived at Redwood Winery around two in the afternoon.
“What happened?”
Warren, who had been waiting in the aging room, asked.
“Ah, you know that guy who came from Castello Farm?”
“Joseph Haggins’s son?”
Warren might not have known Matthew Haggins, but he seemed to know Joseph Haggins quite well. It was only natural that someone of Warren’s stature would know the owner of a winery that possessed To Kalon Farm.
“Yes. He came asking to borrow money, but would you believe it? He wanted to use land already pledged as collateral to the bank as collateral with me too and borrow money. Twelve million dollars, no less.”
“Was he that desperate?”
“He was desperate, yes, and he was probably trying to borrow money without risk in case things went wrong.”
But Warren gave a faint laugh, as if it were nothing unusual.
“There are many children like that in Napa. In truth, my own children were like that too. We raised them with dirt on their hands, but children who grow up like aristocrats never truly understand the value of land. The same goes for wine. They try to make money easily using the capital they have, and often end up causing major accidents.”
“When I looked into it, Matthew Haggins’s case was exactly like that. Wells Fargo told me he seems to have run into trouble while acquiring several wineries in northern Napa.”
“As expected... I don’t know why they do that. Tsk, tsk, tsk...”
If one made good wine, one could earn far more money than that, but the tendency to focus only on making easy money right in front of one’s eyes existed everywhere.
“So what did you decide to do, Master?”
“I went to Wells Fargo, the creditor, and bought Matthew Haggins’s loan from them at a discount outright.”
“You bought the loan yourself?”
“Yes. I agreed to receive fourteen percent annual interest from Matthew over a three-year term. Full repayment at maturity.”
At my words, Warren furrowed his brow.
“Fourteen percent annual interest isn’t merely a reasonable condition, is it? Since you privately took on such a large risk, you could have charged even higher interest.”
“I’m not very interested in playing moneylender.”
“Then you’re betting that Matthew won’t be able to repay the money three years from now.”
“Yes. It should come to a little over seventeen million dollars. I wonder whether he’ll be able to pay it back...”
Warren, his expression serious, nodded faintly.
“It won’t be easy. I heard Castello’s flagship cult wine line has been hovering below the top five and losing value, while this year’s frost damage and heat wave dealt them a major blow. That means they’ll have almost no production this year, so their debt will increase even further. Then they would need sales to be good this year at least, but because of the Lehman crisis, mid- to low-priced consumption has been smashed, so that will be difficult too... If only they had scores as high as our Redwood.”
“That’s why the basics are always important. ‘A winery must have good-quality wine.’ That’s the foundation.”
“Exactly. So it certainly won’t be impossible for them to repay seventeen million dollars. If even a single year’s vintage receives the highest score from the San Francisco Chronicle or draws high praise from Robert Parker, all their difficulties could be wiped away at once.”
“I think so too. Even if the annual interest rate were twenty percent instead of fourteen, if they received rave reviews from the critics, everything would be resolved. But if they can’t...”
Warren’s eyes curved at the corners as if he found it amusing.
“What if he can’t?”
“Then the twenty-five acres of To Kalon will become Redwood’s.”
This was the entire reason I had gone all the way to the bank and done something that looked like moneylending.
“If that happens, Redwood will own To Kalon as well. I can’t even begin to estimate how much Redwood’s value will rise.”
But I opened my eyes wide.
“Oh, come on. We have Silver Oak. To Kalon is good, but Silver Oak’s land is no less impressive, is it? If we have Castello’s To Kalon, we can make a wider variety of lines with more grapes, so I went through a bit of a hassle... In any case, because of that land, this year’s winemaking will be a little different.”
“Yes, I’m looking forward to it myself. To see what kind of grapes come from that land of Master’s.”
Saying he was full of anticipation, Warren smacked his lips and rubbed his hands together.
That was right. Starting this year, the first commercial shipment would begin from the Silver Oak land we had poured so much effort into.
221. Silver Oak’s Grapes (2)
The next day, I was looking over several documents on my desk. It was the assignment agreement for Castello Winery’s debt, freshly sent over from Wells Fargo.
“Hey, are you seriously in your right mind?”
Armando, stretched out on the sofa, let out a hollow laugh as he asked.
“What?”
“What? Lehman’s gone under and Wall Street is a bloodbath, and in the middle of all that, you go to a bank and volunteer to play creditor? Against the Higgins family, no less. I’m a Cab Sauv vineyard owner in Napa now too, so there are rumors I hear even when I don’t try. They say Joseph Higgins isn’t an ordinary man.”
“I’m sure he isn’t. Just looking at the fact that he’s held on to that expensive land in Napa Valley for decades, he can’t be an easy man.”
When I spoke as if it were nothing, Armando did not bring it up any further.
“Well, if you know that... Anyway, I think this heat wave is going to be a big opportunity for our farm. This year, instead of wine, I’m going to switch the winery entirely back to the vinegar process.”
“You must have spent good money cleaning everything out. That’s a shame.”
No matter how similar the processes for wine and vinegar were, it was not something you could just switch back and forth at will. Once acetic acid bacteria spread through wine equipment, the wine would oxidize and lose its market value. That was why the equipment had to be thoroughly washed or separated entirely for use.
Armando had said he was going to make wine this time, so he had extensively cleaned the winery equipment and even brought in new machinery, but all of that had effectively become useless. It was not as easy a decision as simply deciding to order jjamppong after you had been about to eat jajangmyeon.
“Maybe this is the role that suits me. And I don’t think I’ll never have a chance to make wine either. High-end vinegar can sell for as much as any wine, so if I save money and wait for the right time, I might be able to buy a good vineyard cheaply like you did.”
“That’s exactly what I’m saying.”
“So, about that... I’m planning to make vinegar using the method you told me about. The Orléans process.”
“Yeah, that’s the foundation of high-end vinegar.”
“Right. What do I need to go beyond the basics?”
In Armando’s eyes, I could see a seriousness and yearning that had not been there before. Armando had always studied hard, but as time passed, I could sense an even stronger desire in him to succeed.
From my perspective, I liked seeing that side of Armando. After all, a portion of the sales revenue from the wine or vinegar Armando made would come back to me, so there was no way his hard work could look bad to me.
Judging from Jacob’s Golden Grain Soju House, the dividends that came in from the brewery this year alone had surpassed a staggering five million dollars. Next year, it would probably be more than double that, so I would earn over ten million dollars from dividends alone.
The reason I was aggressively acquiring other farms or buying up debt was because I had the financial power to back it up.
“Good. If you want to understand the real principle, you need to approach it through biochemistry, not oenology. Armando, what do you think is the greatest enemy of the vinegar you make?”
“Hmm, unpleasant acidity or a pellicle forming?”
“No, those are beginner mistakes. The real problem is a lack of oxidative esterification. Ordinary vinegar ends with acetic acid bacteria eating alcohol and spitting out acid. But in top-grade vinegar, that acid has to recombine with the remaining alcohol and the organic compounds in the oak barrel to create new aromatic particles called esters.”
I pointed to an empty glass on the desk and continued explaining.
“The grapes you’re using this time were scorched by the heat wave, so their sugar content is extremely concentrated, but their nitrogen compound levels will be a mess. If you’re aiming for mid- to low-priced vinegar, that’s enough, but if you’re aiming for truly high-end vinegar, it can become a problem. If you force fermentation at that point, the vinegar will start smelling like acetaldehyde.”
“You mean that harsh smell like paint remover?”
“Exactly.”
“Then what do I do? Dump in nitrogen nutrients?”
“No. You have to combine fountain-style oxygen supply with temperature shock. During the first seventy-two hours of early fermentation, you supply oxygen in tiny amounts to explosively increase the density of the acetic acid bacteria, then suddenly drop the temperature below ten degrees. Then the bacteria, out of survival instinct, strengthen their cell membranes and release special enzymes. Those enzymes...”
For a moment, Armando blinked at me, not understanding, then asked.
“Wait. First, explain this fountain-style oxygen supply in detail.”
“Heh, sure. The acetic acid bacteria that make vinegar are aerobic microorganisms. They need oxygen to carry out the metabolic activity that converts alcohol into acetic acid, but if you simply drill holes in a wooden barrel like in the Orléans process to make it easier for oxygen to come and go, the oxygen supply is irregular and slow, so fermentation can easily become sluggish.”
“So that’s a weakness of the Orléans process.”
“Right. At times like this, the method of periodically supplying oxygen from the bottom of the fermentation tank in the form of extremely fine particles like microbubbles, as if a fountain were surging upward, is fountain-style oxygen supply. This provides the optimal breathing environment for the acetic acid bacteria, causing their population to increase overwhelmingly in the early stage of fermentation, and it also blows away off-odors such as sulfur compounds that occur early in fermentation along with the oxygen.”
“Ooh, I get it. Then what about temperature shock?”
“Basically, when the environment changes rapidly, microorganisms produce special substances they don’t normally release in order to survive. It uses that survival instinct of microorganisms. If you suddenly flash-chill the environment from the 25 to 30°C range where acetic acid bacteria are active to below 10°C, they rapidly produce unsaturated fatty acids and glycerol. That glycerol gives the vinegar body and sweetness.”
“I see...”
“The viscosity, or legs, that slowly run down the wall of the glass when you swirl vinegar comes from that. Enzymes that gently break down tannins can also be released.”
“So you forcibly feed and grow the bacteria with fountain-style oxygen supply, then wring them out through temperature shock and replace harsh tannins with a soft umami flavor.”
As expected, Armando was someone who was satisfying to teach.
“That’s exactly it. You’ll need to upgrade the equipment, but if you push yourself a little and get this kind of gear, you’ll definitely be able to make vinegar from grapes on a different level. I couldn’t do it at the beginning because I had no money... and there also weren’t this many heat-concentrated grapes like there are this time.”
At such an advanced method, Armando opened his mouth with a blank expression.
“That’s amazing. You don’t raise the temperature, but actually lower it to torment the bacteria? Wasn’t that a high-level technique even in winemaking?”
“That’s right. And the final secret is a variation of the Solera system. You don’t completely empty the oak barrels when bottling the vinegar each year. You leave behind ten percent of the mother vinegar, fill it back up,
lightly toast the inside of the oak barrel, then coat it with white wine distillate.”
“Why?”
“If you do that, the acetic acid bacteria react with the high-concentration alcohol left on the wooden walls and drive the ethyl acetate concentration to the extreme. Then the aroma of black fruit will bloom splendidly inside the vinegar.”
Armando, who had been taking notes in his notebook with a dazed expression, asked.
“Vinegar of this level would fetch a high price, right?”
“A representative example of the vinegar you and I made and sold before using the Orléans process would be Martin Pouret wine vinegar. It would be around fifteen to thirty dollars. But if you do it the additional way I told you, you’ll get something like Aceto Balsamico Tradizionale from Modena, Italy. Several hundred dollars... sometimes even a thousand dollars.”
“Something like that would really come out?”
“Yes. For reference, the balsamic vinegar sold at supermarkets is a cheap type made by mixing caramel coloring into wine vinegar, and what I’m aiming for is the quality of real essence aged for decades. The method I told you about shortens those decades, and I think it’s possible because of the inherent quality of the grapes themselves combined with the innate advantages they gained from being concentrated by the heat wave.”
“Innate advantages? What exactly?”
“Yeah. One reason traditional balsamic vinegar takes decades is because you have to slowly boil down the grape must to concentrate it and wait for the sugars and components inside to change naturally. But grapes concentrated by a heat wave have overwhelmingly higher polyphenol, sugar, and mineral density than ordinary grapes.”
“Right, of course! The grapevines have already finished, as if in advance training, the process of water evaporation and component concentration that should have happened inside an oak barrel over ten years. I only focused on the quality of the grapes and missed that.”
I chuckled as I watched Armando reflect, then asked.
“How’s your dating life going?”
“Ah, don’t be too surprised. I’m actually going on dates with Sienna every day.”
“Who?”
“Sienna. Sienna Harrington.”
“Is Sienna having a really hard time these days?”
“What do you mean? She’s completely fallen for my masculinity. Turns out Sienna is incredibly devoted, you know? For my sake, she let me collect all the dying grapes from Harrington Farm for free. I’m getting more than fifty tons of concentrated Pinot Noir, can you believe it?”
“...Sienna, who didn’t want to spend money on laborers, used you appropriately. Truly genius, isn’t she?”
“That’s not it. She did it for me.”
“She used a man’s feelings to reduce labor costs. Sienna is scarier than I thought.”
“Are you even listening to me?”
At that moment, the office door opened roughly. With a bang, the heavy sound of a cane followed.
“Hey, Brian Choi!”
I wondered who could be so rude, but it turned out to be someone I had seen many times before. The middle-aged man I had first met long ago at the alumni wine showcase and had occasionally run into at wine events afterward was Joseph Higgins of Castello Farm. And the young man who scurried in behind him, watching the mood, was Matthew Higgins, who had suffered a major loss after presumptuously trying his hand at winery M&A.
Matthew Higgins looked as if he had stayed up for several nights, his eyes bloodshot and his shoulders hunched.
Armando sprang up from his seat and scratched the back of his head.
“Oh, Elder Higgins, hello. We met once before at a Napa Valley Vintners meeting.”
Joseph ignored Armando’s greeting and strode right up to my desk. He threw the notice of assignment he was holding onto the desk as if flinging it down.
“Explain what you’ve done. You bought Wells Fargo’s debt? Are you saying you’re going to hold my family’s debt in your hands and toy with it?”
I slowly rose from my seat. Then, with courtesy, I gave a slight bow.
“Welcome, Uncle Joseph. Please sit. You too, Senior Matthew.”
“I have no intention of sitting! Cancel this contract immediately. I don’t know what kind of deal you made with the bank, but our Higgins family has no need for another person’s mercy.”
Intimidated by Joseph’s roar, Matthew murmured beside him in a voice as small as an ant’s.
“Father, please calm down first and let’s talk a little...”
“You keep your mouth shut! You fool! You handed the family’s sacred ground over to someone else, and you still dare to open your mouth?”
Joseph’s eyes glared at his son as if he would devour him. With the situation leaving me no choice, I took a bundle of documents from the drawer.
“Sir, responding emotionally won’t solve anything. Under the American legal principle of Assignment of Mortgage, a creditor can sell a debt to a third party without the debtor’s consent. Wells Fargo followed proper procedure, and I bought those rights.”
I pointed to one page among the documents.
“And here… if you look at the acceleration clause and Cross-Collateralization agreement your son signed. Due to Lehman Brothers’ bankruptcy, Castello’s credit rating fell sharply, and the loan-to-value ratio had already exceeded eighty percent. If not for me, the bank would have proceeded with Foreclosure immediately. I’m telling you, I helped.”
Joseph’s lips trembled faintly. He was not some naive farmer who had spent his life staring at the dirt. As the head of a massive winery, there was no way he failed to understand just how badly his son had screwed up.
Even now, he was talking as if he had come here knowing nothing, but I could bet my entire fortune that wasn’t true. His plan must have been to first pretend ignorance and try to browbeat me, then decide how to respond after seeing my reaction.
“You… are you trying to seize on our family’s weakness and take To Kalon from us?”
“Let me be clear. The person who came to me asking for help was Matthew. He asked me to arrange twelve million dollars for him. From my position, I couldn’t trust that he would really repay twelve million dollars with my money, and I didn’t want to take the risk of accepting a junior lien on land that was already pledged as collateral. So I made a decision that would resolve Matthew’s predicament immediately while eliminating my risk. I bought Matthew’s debt.”
“If you suspect that my goal is to take To Kalon, then give me the money and everything will be resolved. Or you can repay the principal and interest in full at maturity. I even gave him a three-year grace period at an annual interest rate of fourteen percent, which is far more reasonable than the bridge loan rates available in the market. At this point, I don’t think it would be an exaggeration to say I did everything I could for Matthew.”
At my words, Joseph’s face, despite all the preparation he must have come with, flushed bright red.