Deerfield files bankruptcy reorganization plan
Deerfield Ranch Winery in Kenwood has taken a major step to try and come out of bankruptcy by filing a reorganization plan with federal bankruptcy court in Santa Rosa, a blueprint to pay off creditors, including a claim of $11,750,000 owed to its lender, Rabobank.
In general, the plan, which must still be voted on by eligible creditors and confirmed by a bankruptcy judge, allows a restructuring of the Rabobank debt for a five-year period, setting up monthly interest payments as well as increasing yearly principal payments. Any outstanding balance must be paid to Rabobank in its entirety by the end of 2020.
“The fact that these documents have been filed with the court show great progress exiting Chapter 11,” said Robert Rex who, along with his wife PJ, are the managing members of Deerfield Ranch Winery LLC. “We are told that most companies do not accomplish this. We have a lot of support from the community. People believe in us and that has helped get us through this.”
Deerfield is located at 10200 Sonoma Hwy. in Kenwood on a 47-acre property. The winery produces about 30,000 cases a year, including Deerfield’s own labels, as well production for 12 custom-crush clients. The Rexes started the Deerfield brand in 1982, and the LLC was created in 1999. Winery facilities were constructed, including a 23,000-square-foot wine cave, and a public tasting room was opened in 2008. Deerfield currently has about 22 employees. The winery has remained open for business since the bankruptcy filing, with winery operations characterized by Deerfield’s attorneys as, “strong, profitable and growing.”
Deerfield first started to feel financial pressure when construction and opening of the winery was delayed because of a left-turn lane requirement that was supposed to take six months and cost $300,000. Under the auspices of CalTrans, the left-turn lane ended up taking five years with an eye-popping price tag of $1.75 million. Deerfield estimates that the delay in opening the business had a real cost of as much as $8 million.
Deerfield approached Rabobank in 2007 for a loan, with the bank providing an $8 million loan and a $3 million line of credit. In 2010, Deerfield started having trouble making principal payments, and a number of modifications to the financing agreement were made over the next four years.
Eventually Deerfield couldn’t pay a consolidated balloon payment of $567,000 at the end of 2013, and did not have the funds to pay off the $3 million line of credit.
The reorganization plan, if approved, will give Deerfield more time to seek other institutional financing, as well as other investors and partners.
If Deerfield defaults on its obligations to Rabobank, the bank can immediately obtain appointment of a “liquidating trustee,” someone who would be charged with selling the winery. If the trustee can’t sell Deerfield within two years, Rabobank would be allowed to foreclose. A recent estimate of the liquidation of all of Deerfield’s assets (winery, property, etc.) was $17.4 million.
About a year ago, Deerfield was put in receivership by a Sonoma County Superior Court judge. Then in February, Deerfield Ranch Winery LLC filed Chapter 11 bankruptcy, preventing Rabobank from any foreclosure attempt.
Chapter 11 allows a debtor to reorganize its financial obligations while retaining assets, and is granted a stay from any collection efforts by its creditors, such as lawsuits, liens, or foreclosure actions.
Deerfield Ranch Winery LLC is comprised of almost 90 partners, representing close to $16 million invested in the business. Partners have made investments ranging from $75,000 to $1,000,000.
Since the bankruptcy filing, negotiations were ongoing between Deerfield, Rabobank, and a committee of unsecured creditors. Eventually the parties all agreed to the principal terms of a reorganization plan.
On top of the $11.75 million owed Rabobank, the reorganization plan also details a timeline for Deerfield to pay other debts, such as a total of $755,000 to Sonoma County for unpaid property taxes plus fees and interest.
An email to Rabobank’s bankruptcy attorney asking for comment for this story was not responded to as of press time.
Article from:- http://www.kenwoodpress.com