Bankruptcy judge sinks KY distiller’s plan to pay off debt with barrels of whiskey
AI-generated summary reviewed by our newsroom.
- Judge rejects bourbon-for-debt plan, citing depressed barrel market and doubts
- Lender had objected; judge notes glut has triggered a race-to-bottom in pricing
- Bankruptcy status hearing set; judge urges parties to propose alternative plans
A federal bankruptcy judge in Texas has tossed Kentucky Owl and Stoli’s plan to pay off its bankruptcy debt with bourbon.
In a bench ruling late Friday, U.S. Bankruptcy Judge Scott Everett rejected the plan to cover the distiller’s $78 million in debt with 35,000 barrels of bourbon as unfeasible based on the current market conditions, according to legal industry reporting.
Lender Fifth Third Bank had objected to the plan by Stoli Group, which filed for bankruptcy protection in August 2024. The bank had argued the current bourbon market is “dismal,” with prices for barrels of whiskey so depressed it would likely recover only a fraction of its loan.
“Based on my review of the evidence, I have too many doubts in the value of the collateral in this case,” Everett said, according to Law360.com.
The judge apparently did not quote any specific valuations, which had been presented in closed testimony, but agreed the market’s glut has created a “race to the bottom” in pricing, according to the report.
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. 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.
A status hearing is scheduled for Wednesday in the Kentucky Owl/Stoli bankrtupcy; the judge has urged the parties to come up alternatives to modify the plan.
Last month, Yuri Schefler, the majority shareholder in Stoli, the parent of Kentucky Owl, sent a letter to the judge urging him to sign off on the plan. Schefler blamed Russian President Vladimir Putin for a ransomware hack that crippled the company. But Schefler also singled out Fifth Third Bank for tightening its grip on liquidity and forcing the company into bankruptcy.
