Nearly a month after Diversified Metal Engineering (DME) entered into receivership, a Texas craft brewery that paid the Canadian brewing equipment manufacturer more than $1 million in deposits is ceasing operations.
In a December 21 social media post, Big Bend Brewing Co. announced it would “suspend operations” after six years, and shutter its taproom effective December 31. The company has also laid off 14 employees.
“Now, due to a combination of unforeseen hurdles in building our San Antonio location and the challenging macroeconomic conditions affecting investment in the craft beer sector, we find ourselves facing some tough choices,” the company wrote.
“We had high aspirations and lofty goals, and we did everything we could to achieve them,” the post continued. “We want to thank everyone for all the tremendous support over the past 6 years. We remain hopeful and are working hard to make the stoppage temporary.”
The Alpine, Texas-based craft brewery was one of hundreds of North American beer companies that prepaid millions of dollars in deposits and were left in the lurch when DME defaulted on loan payments to the Royal Bank of Canada (RBC). DME owes more than $13.5 million to the RBC and other creditors, including brewery clients and hundreds of employees. A court-appointed receiver, Alvarez & Marsal, is now accepting bids for the business through January 7, 2019.
About a year ago, Big Bend hired DME to build more than $1 million in equipment for its new facility — including a brewhouse, fermenters, chiller, boiler and silo — which the craft brewery “paid for in full,” vice president of operations Mahala Guevara told Brewbound.
According to Guevara, there’s still a shot that Big Bend receives some of its equipment. She said a member of DME’s interim team recently told her that some equipment was being prepared to ship in mid-January, although she wasn’t given an itemized list. Despite having paid in full, Big Bend will again be charged for shipping.
Other equipment, which DME had outsourced to third-party manufacturers, was paid for by Big Bend but not DME, so it won’t be received unless Big Bend works out agreements with those contractors, Guevara said.
DME’s collapse was just one of the factors that forced Big Bend to suspend operations, Guevara said. The company also struggled to complete a capital raise that was intended to help fund the construction of a production brewery in San Antonio. That location was slated to open in the spring of 2019 and, in addition to financing constraints, construction delays also contributed to the decision cease operations, she said.
“We have been struggling this year to to finalize the capital raise for our San Antonio expansion, and many people who expressed early interest and made pre-commitments had their decisions affected by the changing financial climate of the craft beer sector,” Guevara said.
DME’s troubles, along with slowing growth in the craft beer industry, made it “way more challenging” to secure new investment, she added.
Guevara said the San Antonio project is “at a full stop” until a new investor can be brought on board.
“The brewery is just waiting to be built,” she said, adding that the company holds a 20-year lease on the property. “We just can’t get it across the finish line.”
In an effort to secure new investment, Guevara and brewmaster Jan Matysiak have reached an agreement with Big Bend founder and CEO Matt Kruger and partner and president Justin Yarborough to remain with the company through the beginning of 2019.
The company had previously received minority funding from a group of investors that included Dylan Bates — a manager of WC IPA LLC, the holding company that acquired San Diego’s Green Flash Brewing via a foreclosure sale in April — in 2016 and 2017, but the group is no longer invested in Big Bend as of earlier this year.
(Correction: An earlier version of the story indicated that Joshua Yelsey, another WC IPA manager, was an investor in Big Bend. Yelsey considered investing in the company, but he chose not to do so. Yelsey was involved in helping the company build a financial model.)
In other DME news, the company’s South Carolina-based subsidiary, Accent Stainless Steel Manufacturing Group, closed following the Thanksgiving holiday, according to WMBF TV news.
The subsidiary’s nine employees were laid off, and the employees say they are owed thousands of dollars in back pay after checks deposited into their accounts didn’t clear, the outlet reported.
Accent had been in operation for about two years. The company’s 50,000 sq. ft. building and nine acres of land in Loris are now listed for sale via Coldwell Banker Commercial Advantage for $3.2 million.