Maui Brewing places ‘Stalking Horse’ bid for modern-day beer, auction slated for early June
Maui Brewing Company, based in Kihei, Hawaii, launched a “hunting horse” bid to acquire Modern Times Beer, based in San Diego, Calif., which was accepted by a court-appointed receiver. The offer will set the bar for Modern Times’ auction, scheduled for June, a source told Brewbound.
Maui will have the option to raise its initial bid if there is a higher bid during the bidding process. Details of the offer were not shared.
“While this is just the first step in a long process, we believe in the Modern Times brand and believe it provides us with a tremendous opportunity,” said Garrett Marrero, co-founder and CEO of Maui Brewing, in a press release. “They have an amazing and dedicated team and we hope to help the next step in their journey as a craft brewery.”
According to a report filed by court-appointed receiver Thomas C. Hebrank on May 9, the due diligence period opened on April 26 and the deadline for selection of track horses was May 13.
Qualifying bids — those higher than Maui’s stalking horse bid — are due at 5:00 p.m. PT on June 3. An auction will likely take place on June 8, with a hearing to confirm the winning bid later in the day in Orange County Superior Court. .
“The sales process is on track and interest has been very positive to date,” Hebrank wrote.
While news that Modern Times was looking for a buyer or investor was first reported earlier this year, the company has been exploring a sell-off since at least March 2020, when it bought on Arlington Capital Advisors to help oversee the process, according to the receiver’s initial inventory report. , submitted to court on May 9.
“Despite Arlington’s best efforts over the past two years, no buyer has been found,” Hebrank wrote.
In February, Modern Times announced the closure of four of its drinking establishments and the loss of 73 jobs. Two months later, the company announced that it had commenced court-ordered receivership proceedings, following a lawsuit filed by the brewery’s creditor bank, California Bank & Trust (CB&T), regarding a credit in progress.
Hebrank was appointed receiver on April 5, according to court documents. At $375 an hour, his fees were $23,428.20 through April 30 and “will be paid in accordance with Modern Times’ cash flow,” according to the report.
In the original lawsuit filed in late March, Modern Times’ main secured lender, Zions Bancorporation (dba California Bank & Trust), alleges that Modern Times defaulted on three notes and breached a credit card agreement, among other things. complaints, which he notified to the brewery. on January 21, 2022. These notes include a $1.4 million revolving loan, a $7.6 million term loan, a $2.5 million term loan, all with remaining principal balances .
The complaint alleges that Modern Times has failed to pay amounts it owes Zions, including as of March 21, 2022:
- $900,000 on his revolving loan, plus $2,125.01 in interest, $77 in fees and at least $75,000 in attorney fees;
- $4.845 million on his term loan, plus $97,580.71 in interest, $85 in fees, $5,579.37 in late fees and at least $75,000 in attorney fees;
- $1,291,666.86 on his other term note, plus $28,696.19 in interest, $85 in fees, $2,304.44 in late fees and attorney fees of at least $75,000 ;
- $769,134.78 in a breached credit card agreement, plus $15,383 in late fees, plus fiancé fees and attorney fees of at least $75,000.
Additionally, the complaint alleges that Modern Times breached its obligations to subordinated debt holder Live Oak Banking Company, “triggering cross defaults under applicable loan documents, including cross defaults arising from a subordination dated April 1, 2019, between Live Oak, as junior and subordinate lender, and Zions, as lead lender, and (b) experiencing a material adverse change in its financial condition, such that Zions believes that the prospect of payment or execution of the Loans is impaired due to material adverse events (collectively the “Defaults”)”.
Since Hebrank’s appointment as receiver, he has been authorized to borrow $1.1 million from CB&T to operate Modern Times, and has borrowed $551,608.48, according to a report he filed on May 9.
In his assessment of the company’s financial operations, Hebrank noted that the company “continues[s] to maintain operations, including accounts payable, debt collections, equipment sales, negotiations with creditors and suppliers, etc., while both being understaffed and at the same time assisting to the sales process.
“Sales are strong both with demand from the upcoming summer holidays and the addition of large bulk orders,” Hebrank wrote, leading to “accelerated” borrowing due to “the need to pre-finance materials and supplies (primarily cans) to meet sales demand for the busy Memorial Day-4th of July holiday periods.
Earlier this month, Modern Times CEO Jennifer Briggs announced that “the future of modern times” would be known “by the end of June,” during a discussion with the president and CEO. Brewers Association (BA) executive Bob Pease at the Craft Brewers (CBC) conference. ) in Minneapolis.
Hebrank accepted Maui’s offer, but, in accordance with the receivership process, and if Maui wins the auction, the court will still have to approve the sale and its terms, according to the Brewbound source, who added that he there is “no indication that [the court] would not approve of what the receiver (who is an officer of the court) collects. »
Maui Brewing produced 62,592 barrels in 2021, a +55% increase over 2020, which places the Brewers Association (BA) Top 50 Craft Breweries list at No. 44. The company has a production target of 100,000 barrels in 2022, Marrero told Brewbound. in November. Growth is supported by the transition of all “mainland production” – all Maui offerings produced for sale outside of Hawaii – to Sleeping Giant Brewing Company in Denver.
In April, Maui Brewing’s shipments increased by +17%. The company “continues to underproduce based on customer demand,” with a “minimum 15% incremental volume growth left on the table due to labor and supply shortages,” according to the communicated.
Southern California is Maui Brewing’s second-largest market — after its base in Hawaii — allowing for “wholesale network synergies” between Maui and Modern Times, should Maui win the bid, according to the release. The company added that Modern Times’ “incredible staff, innovative products and dedicated customers” are all “sympatico with Maui Brewing Company.”
Additionally, Maui Brewing has “several key capital improvement projects underway to improve production capabilities” for its family of brands, including Maui Hard Seltzer, Kupu Spirits and Island Soda.
“The potential acquisition would not impact the operations of the Kihei facility or Maui’s current mainland operations,” Maui Brewing noted in the release.