The spirits distilling industry has faced financial distress in 2024 for various reasons, including lasting effects from the Covid-19 pandemic, rising operating costs caused by inflation, decline in demand for alcoholic beverages and legal issues.
Colorado-based Lee Spirits Co., a distiller of premium gin, vodka and liqueurs, on March 8, 2024, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Colorado after shutting down all operations four days earlier.
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The debtor said that it had ceased operations as it could not overcome the prolonged impact of the Covid-19 pandemic and "the ever-changing industry landscape."
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Weeks later on April 29, Montana Distillery, which produces a dozen varieties of vodka, gin and whiskey, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Montana, four years after relocating to another city to hopefully cut expenses and survive.
Montana Distillery faced rising costs and property taxes and decreased revenues caused by the Covid-19 pandemic when it pulled up stakes at its Missoula, Mont., distillery business, relocated to Stevensville in August 2020 and opened its tasting room on Christmas Eve 2020.
The debtor's economic problems continued, forcing it to file bankruptcy and shutter its operations.
Popular vodka distiller Never Forget Brands, which manufactured GameDay Vodka and Spiked canned vodka cocktails, on July 10 filed for Chapter 11 bankruptcy facing judgment liens from the National Football League's Buffalo Bills, owed $560,000, and New England Patriots affiliate Kraft Sports and Entertainment, owed $450,000.
The debtor also owed unsecured claims to other NFL teams, including the Denver Bronco's affiliate Stadium Management Co. ($500,000,) Baltimore Ravens ($150,000,) New Orleans Saints ($150,000,) and Indianapolis Colts ($110,000.)
And now a huge global vodka brand is facing bankruptcy.
Loan defaults force Stoli to file for Chapter 11 bankruptcy
Iconic vodka brand seller and distributor Stoli Group USA and affiliate Kentucky Owl filed for Chapter 11 bankruptcy reorganization facing severe financial distress after defaulting on over $78 million in secured debt owed to Fifth Third Bank NA.
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The New York City-based debtor filed its petition on Nov. 27 in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas listing $100 million to $500 million in assets and $50 million to $100 million in liabilities.
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The subsidiary of Luxembourg-based Stoli Group, which manufactures and produces vodka and other spirits to be sold in the U.S. and globally, listed its largest unsecured creditors, including $6.1 million owed on a subordinate loan to SPI Worldwide Trade Ltd.; over $884,000 owed to Motive Marketing Group; over $797,000 owed to Colangelo & Partners Public Relations; and over $770,000 owed to Republic National Distributing Co., according to its petition.
The debtor also owes unsecured trade debt to Major League Baseball's Los Angeles Dodgers (over $539,000,) the National Hockey League's Florida Panthers Hockey Club (over $323,000,) and the National Football League's New Orleans Saints (over $275,000.)
Stoli USA cited several challenges that led to its Chapter 11 filing, including a decline in demand for alcohol and spirits after the Covid-19 pandemic, beginning in 2023 and continuing into 2024; increased operating costs and inflation in the global economy; a lending dispute with Fifth Third Bank; and a severe data breach and ransomware attack in August 2024, according to a declaration by its CEO Chris Caldwell.
The debtor had defaulted on $41 million and $37.3 million owed to Fifth Third Bank on secured revolving credit facilities in July, August, September, October and November 2024. The lender also sent letters to 10 Stoli vendors, suppliers and storage providers informing them of the defaults.
Stoli hit by data breach, ransomware attack
The data breach and ransomware attack to its infrastructure caused substantial operational issues throughout all of its companies as its enterprise resource planning system was disabled and its internal processes were forced into a manual entry mode.
The company expects to restore all systems in the first quarter of 2025. Stoli did not identify the culprits in its data breach and ransomware attack.
The company said in the declaration that it has been in a 23-year legal battle with the Russian government that has cost it millions of dollars in court costs in a fight for its privatization rights to Stolichnaya and Moskovskya vodka that it purchased in the 1990's after the fall of the Soviet Union.
Russian President Vladimir Putin in March 2000 issued an executive order reinstating and protecting the Russian state's rights to vodka trademarks that were privatized in the 1990's.
The Russian government in July 2024 confiscated the last two remaining Stoli distilleries in Russia, valued at about $100 million, in relation to the Russia-Ukraine war, as the company was designated as extremists and for providing humanitarian aid and engaging in marketing activities to support Ukraine refugees, the declaration said.
The debtor's parent Stoli Group manufactures, produces, sells and distributes vodka, bourbon, tequila, wine, scotch whisky, rum, ginger beer and other alcoholic and non-alcoholic beverages globally.
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