USA: Bankrupt Judge expressed doubts that Pittsburgh Brewing Co. will emerge from operating under bankruptcy code

Bankrupt Pittsburgh Brewing Co. probably can't survive under the financial reorganization plan it filed last week, a bankruptcy judge told lawyers in the case October 23, The Pittsburgh Tribune-Review posted October 25.

U.S. Bankruptcy Judge M. Bruce McCullough repeatedly expressed doubts that the brewery will successfully emerge from operating under Chapter 11 of the bankruptcy code. The creditors must approve the reorganization plan.

"This case isn't going anywhere. The end is in sight. We've got 138 employees out there. They're being misled," McCullough said during a 45-minute hearing in his Pittsburgh courtroom. "That (reorganization plan) doesn't fly," because the brewery won't have any equity remaining after repaying its creditors, he added.

The Lawrenceville brewery probably will need $12 million to survive, McCullough said, rather than the $7 million it said it needs to modernize operations and market Iron City and IC Light and other beer brands. "It's in too small of a market" with an old plant, he said.

Despite those obstacles, Pittsburgh Brewing attorney Robert O. Lampl told McCullough the brewery can remain in business with new financing. It has identified an investor and may have an answer in two or three days.

While the brewery rejected a $7 million capital investment offer for reasons he did not explain, it has a third party interested in making an investment, Lampl said. The brewery might even have a Plan C, in which the workers would not have to make any concessions, he added.

"Win, lose or draw, this thing will survive," Lampl said of the 145-year-old brewery.

Whether Pittsburgh Brewing can survive may be known on November 07, when McCullough hears the company's request for $500,000 in interim financing. Craig E. Newbold, an East Liverpool, Ohio, businessman, has offered the brewery a line of credit to help preserve jobs.

The brewery's unsecured creditors won't support interim financing, "unless there is the prospect of real financing," said Robert Sable, the attorney representing unsecured creditors. The company has yet to reveal its prospective financier.

"November 07 is the doomsday," Sable said. "I've pointed out to everybody, doomsday is at hand."

The workers "absolutely understand the gravity of this situation," Michael Healey, an attorney for unionized bottlers and brewers, told McCullough. Concessions from Pittsburgh Brewing's two unions, tied to a credible reorganization plan that includes $10 million in new financing, could "cut the mustard," said Healey, who represents the International Union of Electrical Workers-Communication Workers of America locals 22B and 144B.

The unions unanimously rejected Pittsburgh Brewing's demands for concessions, which were estimated to be worth between $1 million and $2 million.

"I'm not sure any concession they can give up can save this," McCullough said.

The brewery did agree yesterday with the U.S. Alcohol and Tobacco Tax and Trade Bureau's request that it forfeit a $500,000 surety bond and a $43,000 cash bond as partial payment for an excise tax debt of more than $745,000 on the production and shipment of beer. The debt stretched back to 2001.

Although U.S. Assistant Attorney Jessica Smolar said federal statute requires breweries to have current bonds to cover excise taxes, Lampl emphasized the brewery could not obtain a new bond.

"The alternative is to close them down, if you want to close them down in lieu of that (bond)," McCullough said.

Smolar did not press the issue nor did the government require the brewery to make monthly payments of $20,000. The government, however, wants Pittsburgh Brewing to repay $48,000 in checks that bounced because of insufficient funds.

25 October, 2006