Second bankruptcy filing planned for Kentucky distillery, in anticipation of sale
AI-generated summary reviewed by our newsroom.
- Luca Mariano Distillery will file Chapter 11 by Nov. 14 to pursue a sale process
- LMD Holdings remains in bankruptcy with about $33 million in creditor claims
- Distillery plans CRO hire and 120-day sale timetable amid industry downturn
A bankruptcy involving a start-up Kentucky distillery is about to expand.
Luca Mariano Distillery plans to file for bankruptcy on or before Nov. 14, joining LMD Holdings, which owns the Boyle County property on which the shuttered distillery sits.
During a status conference Tuesday in federal bankruptcy court in Michigan, LMD Holdings attorney Robert Bassel told U.S. Bankruptcy Judge Paul Hage that the distillery plans to file for Chapter 11 bankruptcy protection and “contemplates a sale process for LMD Holdings and the distillery within approximately 120 days of the contemplated Chapter 11 filing of the distillery.”
They also plan to move to hire David Baker of turnaround firm Aurora Management Partners as chief restructuring officer. Aurora Management also has been employed as the receiver for defunct Garrard County Distilling.
LMD Holdings has been in bankruptcy protection since July and is due to file a reorganization plan soon. LMD Holdings had asked for more time, but investment firm SummitBridge, which is the primary creditor, had objected, saying LMD was stalling and had made no effort to keep the creditor in the loop on any potential sale.
A hearing is scheduled Nov. 14 on the request for the extension and the objection.
Future of Luca Mariano Distillery
Both the distillery and the property are owned by Francesco Viola, who had said he planned to “reopen” the distillery in Danville but that appears to be in question.
LMD Holdings filed for bankruptcy protection just as a Kentucky judge was about to rule on appointing a receiver and sending the distillery to a master commissioner’s sale to pay of millions in debts owed in liens related to construction.
LMD owns the real estate where the distillery is located, but more than 6,000 barrels of bourbon in a rickhouse on that property are owned by the distillery, according to court records.
It’s unclear if the second bankruptcy will include additional debts; according to court documents, LMD Holdings had about $33 million in debts.
Besides SummitBridge, which bought out the original loans from Truist Bank, other major creditors of LMD Holdings include contractors Doss & Horky of Danville, more than $2 million; Farm Credit of Elizabethtown, more than $2 million; Farm Credit Leasing of Louisville, almost $2.2 million; Keystone Industrial, more than $1.2 million; Schardein Mechanical of Louisville, $531,000; Insulation Solutions of Elizabethtown, almost $370,000 and Hayslett Mechanical of Harrodsburg, almost $273,000.
Viola envisioned creating a “Napa Valley of bourbon” in Central Kentucky. In a statement to the Herald-Leader in July, Viola said that he filed for bankruptcy “to maximize the value of the assets for all stakeholders. Luca Mariano Distillery and LMD Holdings have a successful business model, have weathered the prior economic challenges in our industry, and are poised to emerge successfully, ideally with the support of its employees, customers, community and creditors.”
Kentucky bourbon, other distillers in trouble
The financial difficulties come as Kentucky’s $9 billion bourbon industry is facing increased economic pressure from declines in domestic demand as well as slumping exports. This has led to a dramatic slowdown in whiskey production and layoffs in the industry.
Luca Mariano was one of at least three Kentucky distilleries facing claims of unpaid debt. In April, Garrard County Distillery in Lancaster was placed in receivership with $2.2 million in liens and remains shut down; Truist Bank claims Garrard County owes more than $26 million.
Meanwhile, a $1.7 million lien was filed in May against Whiskey House of Kentucky in Elizabethtown over a contract dispute with a builder.
Other whiskey brands, including Uncle Nearest in Shelbyville, Tenn., and Kentucky Owl bourbon, have also landed in financial jeopardy.
Uncle Nearest is now in the hands of receiver after defaulting on more than $100 million in loans to a Kentucky lender.
Kentucky Owl and its parent company, Stoli Group, have been in bankruptcy protection for nearly a year. Last month, a Texas judge scotched a plan to pay off more than $78 million in bank debt by selling barrels of bourbon, saying the plan was “unfeasible” because of the “frozen” whiskey market.
