Kentucky Owl bourbon won’t go to liquidation immediately. Here’s why
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- Judge orders trustees to take over Kentucky Owl and Stoli Chapter 11 cases.
- Fifth Third wins argument for orderly sale of 35,000 barrels to maximize recovery.
- Fifth Third says liquidation remains possible; industry downturn has spurred layoffs.
A Texas bankruptcy judge has ordered the appointment of Chapter 11 trustees to take over the Kentucky Owl/Stoli bankruptcies rather than dumping everything immediately into liquidation.
The move came after lender Fifth Third Bank objected to motions filed last month by Kentucky Owl parent Stoli Group (USA) and by the unsecured creditors to convert the reorganizational Chapter 11 bankruptcy to Chapter 7 liquidation.
In a Jan. 18 news release, Kentucky Owl and Stoli said the action will not impact its other U.S. and non-U.S. operations, including Louisiana Spirits. Stoli Group blamed a protracted legal dispute with the Russian state as well as a slowdown in the U.S. spirits market “and a lack of support and flexibility from the Group’s finance partners” for the bankruptcy.`
Fifth Third Bank argued successfully that they and the other creditors could receive more money back from an orderly wind-down sale of 35,000 barrels of bourbon under a trustee rather than dumping everything on the market at once. Now trustees will be appointed to handle the cases separately and the bank has agreed to another credit extension.
But Fifth Third doesn’t want to be stuck with the bourbon either and said ultimately liquidation may be coming so the ultimate fate of the once-acclaimed brand is still up in the air.
The bank last year objected to Kentucky Owl and Stoli’s plan to pay off $78 million in debt with barrels of bourbon, saying they would be on the hook for more than $60 million. Texas U.S. Bankruptcy Judge Scott W. Everett scotched the plan, saying the market for aging bourbon and whiskey was “dismal” and unlikely to recoup much for the creditors.
Earlier this week, the judge also asked Stoli to attempt to mediate a dispute with Tabasco maker McIlhenny over lookalike hot pepper sauce vodka packaging. That adversarial case in the bankruptcy is still pending.
Wider bourbon industry downturn continues
Besides Kentucky Owl, in the last year Garrard County Distilling shut down, Luca Mariano filed for bankruptcy and Uncle Nearest in Tennessee is in the hands of a receiver.
Now Luca Mariano’s assets, including the distillery and 6,000 barrels of bourbon, are going up for sale to pay off $34.5 million in debts.
Major bourbon brand Jim Beam confirmed in December that it planned to idle its homeplace distillery in Clermont for a whole year as it rebalances whiskey inventory.
Troubled Tennessee whiskey and bourbon brand Uncle Nearest goes before a judge next week to rule on continuing a receivership that may be all that prevents foreclosure.
Major bourbon companies, including Brown-Forman and Diageo, have announced layoffs as whiskey sales have declined due to economic pressures and shrinking demand among younger drinkers.
This story was originally published February 6, 2026 at 10:43 AM.
