A judge in Orange County Superior Court has approved the sale of San Diego-based Modern Times Drinks to BX MT BAMF LLC – a limited liability company connected with Anaheim, California-based Brewery X – for $20 million.
Judge John Gastelum signed and filed an order approving the auction sale of Modern Times on Friday, June 24. Brewery X must send the full $20 million in cash to Modern Times’ receiver Thomas Hebrank within seven days, with the sale closing no later than July 7 – 14 days after Judge Gastelum’s sale approval, per the asset purchase agreement (APA). The sale closing will be “deemed effective as of 5 p.m. Pacific Time on the day prior to the closing date,” according to the order.
Hebrank named Brewery X’s bid as the “highest and best bid” in an auction on June 17, which came under fire from another bidder.
The decision was disputed by MTD Asset Acquisition – a group referred to in the auction as the Wilmington, North Carolina-based brewery TRU Colors – which submitted a bid of $20.1 million, with a 120-day maximum closing period, and a request for Hebrank to file for Chapter 11 bankruptcy.
MTD filed an objection order on June 20, claiming Hebrank attempted a “change of rules in the middle of the auction,” by giving priority to Brewery X’s bid, despite it being $100,000 less than MTD’s bid. The company also submitted a new offer of $21 million with a 30-day closing window, and no bankruptcy filing. Details of the contested auction events were replayed in partial auction transcripts included in additional declarations filed in support of MTD’s objection last week.
“All objections to the auction, sale and the sale process, if any, have been considered by the court and are overruled,” according to the sale approval order issued Friday.
Should Brewery X fail to close the sale “timely or otherwise,” the sale will go to the backup bidder, Aumakua Holdings, Inc., which participated in the auction on behalf of Kihei, Hawaii-based Maui Brewing Co. Hebrank accepted Maui’s backup bid at $15.3 million with a 120-day closing window. MTD was first offered the position of backup bid, but declined, according to Hebrank’s declaration in support of the auction sale and results, filed June 20.
Once the sale is closed, Brewery X will retain all assets, property leases, contracts, production equipment, permits (excluding liquor licenses), intellectual property, and “all net proceeds” “earned between the auction date and closing date,” from Modern Times, according to the APA.
As Brewbound previously reported, Modern Times pays $140,836 in rent each month across nine properties, and owes a total of $222,938 in back rent across the leases. Those properties are listed as assumed liabilities in the APA. The schedule for those payments “may be updated and modified at [Brewery X’s] sole discretion at any time prior to closing,” according to the APA.
Brewery X will not have any “obligations whatsoever for any compensation or other amounts payable to any current or former employee,” at Modern Times, “including without limitation, hourly pay, commission, bonus, salary” “for any period at any time on or prior to the closing date.” Additionally, “nothing in this sale order or the APA requires the buyer to offer employment to any employees of Modern [Times],” according to the judge’s filing.
Modern Times Needs Additional $400K to Fund Operations Through Sale Close
A court hearing is scheduled for today (June 27) to approve an additional $400,000 in funding to maintain the brewery’s operations.
On June 23, Zions Bancorporation (California Bank & Trust), Modern Times Drinks, and receiver Hebrank filed a joint ex parte order for an immediate infusion of $400,000 to meet the brewery’s payroll and materials purchases for the next several weeks and maintain the brewery “as a going concern,” “preserve value to the receivership estate,” “avoid operational cash shortfalls pending confirmation of the sale of Modern Times,” and “avoid irreparable harm to the receivership estate, the bank, the putative buyer, and other parties in interest.”
During a June 20 hearing, Hebrank said Modern Times is “out of money” and facing a cash shortfall that would cause it to miss scheduled payroll this week, as well as materials purchases.
“Such a cash shortfall might jeopardize completion of the pending auction sale,” the joint ex parte application reads. “If the auction sale of Modern Times fails due to operational cash shortfalls, everyone will suffer irreparable harm, including whichever putative auction buyer of Modern Times the court confirms, as discussed at the auction sale confirmation hearing last Monday, June 20, 2022.”
According to the filing, the additional $400,000 would increase the total receivership borrowing to $1.5 million, with $1.1 million already advanced to Hebrank and “exhausted.” Borrowing was “accelerated” earlier in Hebrank’s receivership to acquire cans to meet sales demand as the summer selling season ramped up, according to prior court filings.
“On Tuesday, June 28, 2022, the receiver will need an additional $250,000 in the Modern Times account over and above the cash that it expects Modern Times to have on that date to fund the payroll due to be paid on Friday, July 1, 2022,” the application reads. “Additionally, the receiver will need another $145,000 to fund materials purchases for that week — of June 27 — and onward for a few additional weeks, until the court confirms an auction sale buyer.”
Zions is willing to advance the money to the receiver, upon court approval, and the parties said there are no known objections to the additional money being issued.
Update June 27, 3:06 p.m.
Brewbound requested comment from Modern Times CEO Jennifer Briggs. She responded with the following:
“I am not going to comment much except to say that I am so proud of this generation of Modern Times employees – we were able to take a company from near liquidation to a sale of an ongoing concern. There is a lot to be proud of. With a turnaround like we did, it cannot be measured by IRI data. It can be measured by selling everything we produce. This generation of employees (November 2021 to June 2022) worked for each other to make this happen.
“At some point, I’ll have comments on turnarounds in general and will have more metrics to share, but I need to move through this transition period. If I had a piece of advice – chin up, face the hard issues head-on, focus, and be a relentless believer. The group of pros – Sullivan Hill, Stapleton Group, and Onyx – they jumped in when I was most afraid of the future and we worked together to put short-term order in place to have a more financially positive outcome. In terms of the future – X stepped up to the plate in the sale and they will be taking the Modern Times brand to their next level. This next chapter will be their story to tell.”