Popular vodka maker files bankruptcy citing slew of problems and up to $100 million debt
Last week, a well-known vodka manufacturer filed for Chapter 11 bankruptcy protection in court.
Due to a number of problems, including millions of dollars in debt, Stoli Group USA is finding it difficult to survive in the market for luxury alcoholic beverages.
Owning twelve wine and alcohol businesses, Stoli Group USA is well-known for its high-end vodka, Stolichnaya.
The multinational beverage corporation SPI Group owns the business, which is a division of The Stoli Group.
Stoli Group USA filed for bankruptcy on November 27 in the US Bankruptcy Court for the Northern District of Texas following a string of financial difficulties.
According to PacerMonitor, on the same day, its Kentucky Owl American Whiskey division declared bankruptcy.
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The bankruptcy action, according to Stoli Group USA, was “appropriate and in the best interests of the Company.”
In a bankruptcy-related filing, CEO Chris Caldwell stated that the vodka manufacturer is currently facing “significant balance sheet and liquidity challenges caused by a range of factors.”
Caldwell added that after the pandemic, “especially beginning in 2023” and continuing into 2024, there was a decline in consumer demand for spirits and other forms of alcohol.
Inflation and rising operating expenses also played a role in Stoli Group USA’s decision to file for bankruptcy.
A dispute with a lender and a hack in the fall have also had an effect on the company’s finances.
According to the vodka manufacturer, any systems that were affected by the ransomware attack should be fully operational again “no earlier than in the first quarter of 2025.”
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In the bankruptcy documents, Caldwell also mentioned that the Stoli Group has been embroiled in a costly legal dispute with Russia for many years regarding its Stoli vodka.
According to Stoli Group USA, its assets range from $100 million to $500 million, while its debt is believed to be between $50 million and $100 million.
In order to “give the Debtors a breathing spell and reprieve and the runway for a Chapter 11 plan process that will allow the Debtors to restructure their balance sheets and emerge from bankruptcy as leaner, stronger entities,” the CEO explained that declaring bankruptcy would be necessary.
According to Caldwell, in the coming months, Stoli Group USA and its partner Kentucky Owl want to submit a “joint plan of reorganization” that “will preserve employee jobs and allow the Debtors to continue as a going concern”.
How does bankruptcy work?
A certain legal procedure called bankruptcy assists businesses in getting rid of debt they are unable to pay back.
Businesses can start over and obtain new credit through the process.
According to Investopedia, bankruptcies, which are overseen by federal courts, make it easier for a business to sell off its assets in order to satisfy its creditors.
Restructuring a firm with the intention of staying open, even if it means selling off the majority of the company’s assets, is accomplished through Chapter 11, a regular procedure for businesses.
In contrast, Chapter 7 puts a business out of business by selling all of its assets.
In contrast, Chapter 15 permits cooperation between U.S. and foreign courts to handle bankruptcy cases involving “parties of interest involving more than one country,” according to the U.S. Courts.
While they go through the bankruptcy process, customers will still be able to buy Kentucky Owl and Stoli Group USA alcohol goods.
According to the company’s website, Stoli Group has been producing vodka in Latvia since the late 1930s.
After Russia invaded Ukraine in 2022, the alcoholic beverage’s name was changed from Stolichnaya to Stoli.
After declaring bankruptcy, other businesses are attempting to reorganize their operations.
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