Troubled KY bourbon company accused of using bankruptcy to delay distillery sale
AI-generated summary reviewed by our newsroom.
- SummitBridge accuses LMD Holdings of using Chapter 11 to delay distillery sale
- Creditors list $33M claims and seek receiver after missed loan payments
- Kentucky bourbon sector shows market decline, foreclosures, and production cuts
A troubled Kentucky bourbon company is accused of stalling on plans to sell the distillery to pay off millions in debts.
The parent company of Luca Mariano Distillery in Danville, which is in bankruptcy, is scheduled to file a reorganization plan by Oct. 15 but asked for more time. Late last month, parent LMD Holdings asked to extend the deadline to Nov. 14.
Now SummitBridge, an investment company,which is the largest creditor and is owed more than $25 million, has objected, saying Luca Mariano’s parent is just stalling and has not been taking any action to settle things.
There’s already bad blood between the two: SummitBridge, which bought out the distillery’s loan from another bank, had petitioned in July in Boyle Circuit Court for a receiver to take the distillery over and send everything to the master commissioner to sell.
Rather than file an objection to the receiver, parent LMD Holdings filed for bankruptcy in Michigan, the home state of Luca Mariano owner Francesco Viola, about 15 minutes before the receivership hearing was scheduled to start in state court.
“Since that time, the debtor has made virtually no progress in this Chapter 11 case, which demonstrates the debtor’s true intentions in filing for bankruptcy protection: delay,” SummitBridge said in its filing on Monday in federal bankruptcy court.
How much does Luca Mariano Distillery owe?
In requesting the delay, Luca Mariano’s parent had said that they anticipated they would be able to reach agreement quickly “on a liquidating process” and that they are attempting to negotiate but that things are complicated: 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, LMD said. While the holding company has filed for bankruptcy protection, the distillery itself has not yet.
“It appears that there are approximately $33,000,000 in claims against the debtor, including various secured lenders and construction lien claims, some of which have recourse as to third parties,” according to court documents.
But SummitBridge says there have been no negotiations, and they haven’t seen any draft plan for liquidation. SummitBridge also said that since before the bankruptcy, they have not received any payments on the outstanding loan.
Luca Mariano Distillery was on the verge of officially opening this spring when it was sued by contractors and faced multiple liens for more than $3.8 milion for construction of the distillery. When LMD Holdings filed for bankruptcy in July, that case was put on hold.
Luca Mariano Distillery was founded by Francesco S. Viola, who 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.”
Viola went forward with a ribbon cutting ceremony in June, touting SummitBridge as a new “strategic partner” when in fact the company had bought out Truist Bank’s defaulted loans in March and was moving to foreclose.
Other major creditors of Luca Mariano 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.
Other bourbon industry problems
At the time, it was the third new Kentucky distillery to face claims of unpaid debt in recent months. In April, Garrad County Distillery in Lancaster was placed in receivership amid $2.2 million in liens; 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 landed in financial jeopardy.
Uncle Nearest also is now in the hands of a receiver after defaulting on more than $100 million in loans. Kentucky Owl and parent Stoli Group are in bankruptcy protection, where a judge last week said plan to pay off more than $78 million bank debt by selling barrels of bourbon was “unfeasible” because of the decline in the market.
The financial difficulties come as Kentucky’s $9 billion bourbon industry is facing declines in domestic demand as well as exports that have led to a dramatic slowdown in whiskey production and layoffs in the industry.
