In 2002, we were introduced to this company by a merger and acquisitions firm located in Seattle, Washington.  When we met the client and reviewed its financial situation, we could see the business was basically insolvent with liabilities of $1.6M and a negative net worth.  We undertook mitigation of the non-shareholder debt.  Through negotiation we took $1.4M of debt and reduced it to $570K.  We found a loan source to fund the debt retirement with a loan secured by the real estate on which the winery sits and on adjacent property owned by the principals. 

The next step was to close a non-profitable location into which the winery tried to expand.  This required further landlord negotiation, but when done we reduced annual operating expenses by a low six-figure amount.

We then set out to create liquidity for the winery, its shareholders and the primary principals.  We entered into an interim marketing agreement and an option to purchase the winery business with another winery.  That transaction was completed in mid-2005.  The winery's business is now to operate its tasting room facilities, liquidate its pre-deal grape wine inventory through the retail facility and manufacture its high quality fruit wines for sale through the acquiring winery's distribution channels and its retail location.  The acquiring winery is enjoying success at its expansion goals which bodes well for the sale of the winery business under the option agreement in the next two to three years.  At the time of exercise, the pre-negotiated sale formula should see the winery able to liquidate all of its debt and own its property free and clear.

The winery sits on extremely valuable property.  The next phase is to commence the development or sale of the property to provide ultimate liquidity to the shareholders.  We expect this process may take several years if development is the choice. 

We continue to provide the winery and its primary shareholders with advisory services.

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Copyright 2002 - 2006 - M. D. Smith & Associates, Inc.
Last Modified:  April 17, 2006