Bye-bye, beer! Reorganization unlikely for indebted, local brewery, so founder hopes to sell

The label from a California blonde ale manufactured by Coast

The Coast Range Brewing Company has stopped making beer due to
bankruptcy, but its founder said he is confident a buyer will
rescue the 13-year-old Gilroy company.
The Coast Range Brewing Company has stopped making beer due to bankruptcy, but its founder said he is confident a buyer will rescue the 13-year-old Gilroy company.

It is an all-around tough time for Coast Range founder Ron Erskine. Not only has the 57-year-old accepted the brewery’s financial failure, but he is also coping with a deflated housing market as a Morgan Hill real estate agent.

For more than a month now, the brewery’s mammoth metal vats have sat silent and its conveyor belts still and bottleless. The private company on Monterey Street near the intersection of 10th Street has not been able to reorganize since declaring Chapter 11 bankruptcy Dec. 12 with the U.S. Bankruptcy Court in San Jose.

The company owes more than $770,000 to various creditors, according to court documents. This comes after the Internal Revenue Service, the state of California, the Treasury Department and Santa Clara County placed 14 liens since June 2006 on the brewery totalling more than $330,000. A civil judgment that same month also awarded the California Department of Conservation $21,793, according to the online court database WestLaw.

“We weren’t able to pay our bills,” Erskine said. “I’m very encouraged at the prospect that the brewery will continue, but I have to acknowledge the real possibility it will not.”

Chief Executive Officer Craig Kennedy did not return multiple messages, but Erskine said an undisclosed number of contract brewers that were using Coast Range are now trying to find replacement breweries to make their products.

“Some have moved on. Others are in a holding pattern,” Erskine said of the brewery’s clients. “We’re all just waiting to see where the chips fall.”

Two chief creditors in the case are Pacific Capital Bank in Agoura Hills and Saxco-Demptos, a bottle designer in San Francisco, according to court papers. The latter already collected nearly $35,000 last November after winning a separate collection suit against the brewery. State and federal tax authorities also seized more than $17,000 owed in back taxes from the company at the end of last year, according to the brewery’s statement of financial affairs filed with the bankruptcy court Jan. 4. The brewery is still working out other back taxes, Erskine said.

Court documents also show that the brewery’s many creditors have until April 8 to file claims, but Erskine said the company has filed a self-imposed deadline to find a buyer before February. Of the 124 creditors identified in court papers, so far 18 public and private creditors have claimed nearly $770,000 in losses. Among these creditors is well-known Gilroyan Ernest Filice, who claimed Dec. 28 that the brewery owes him $343,807.

As for the future, Coast Range’s five stock-holders have identified two potential buyers, but neither has made a written offer yet, said Erskine, who added that he will not stay with the company after its anticipated sale. The likely scenario is that a mixture of current and new owners will take over the brewery, Erskine said, but there is always the chance of liquidation. The brewery had $65,821 in inventory last November and grossed a little more than $700,000 in sales last year, according to the court documents.

Despite the somber figures, Erskine recalled the first beer that rolled off the line in January 1995 with a nostalgic tone. Of all the ales and lagers that have gone through the building, Erskine said his all-time favorite was the Scotch Ale, a malty brew with 7.5 percent alcohol by volume that took six weeks to brew instead of the normal two weeks.

“Even Coors Light drinkers loved it,” Erskine said.

Now the company just needs to find someone who will love the barn-like brewery.

Gross brewery sales

$675,053 – 2005

$851,241 – 2006

$702,846 – 2007

Amount claimed by creditors to date

$767,813.38

Source: U.S. Bankruptcy Court, Northern District of California

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