Bankrupt Pittsburgh Brewing filed its long-awaited reorganization plan yesterday, saying it intends to modernize the 145-year-old Lawrenceville brewery with $7 million from investors and lenders.
The investment would be used to pay bankruptcy-related expenses and purchase a new boiler and a keg system, which would allow the brewery to expand sales to taverns. Remaining funds would be used for marketing. The plan is based on estimated annual savings of $1 million by revising its labor agreement and terminating a union pension plan.
Pittsburgh Brewing's plan, filed in U.S. Bankruptcy Court, Downtown, does not disclose the investors or who would provide financing to the company. The loans would be in addition to a $500,000 line of credit the company has arranged through Craig Newbold, an East Liverpool, Ohio, native whose fortune is based on a software venture he developed and sold.
Some long-suffering creditors will likely object to the 18-page plan, which contests claims filed against Pittsburgh Brewing by several major creditors, most of them government agencies. Unsecured creditors would get 33 cents for every $1 they are owed. They would get less if creditors win claims the brewery is disputing.
Members of the IUE/Communications Workers of America have thus far rejected the wage and other concessions the brewery is seeking, saying they will base their final decision on the merits of the reorganization plan.
President Joseph Piccirilli, who would continue to run the brewery, would increase his ownership of the company to 50 percent under terms of the plan. Jack P. Cerone, the son of a former Chicago mob boss who has an $8 million claim against the company, would double his ownership stake to 40 percent by converting the unpaid loans he provided to the brewery to equity.
Other secured creditors who would be paid in full include the Pennsylvania Industrial Development Authority, which would receive $577,700 owed on a $1.4 million, five-year loan it provided in 1996; a union pension plan that would receive $200,000 in overdue contributions; and the City of Pittsburgh, which would collect $50,800 in unpaid real estate taxes. Mr. Piccirilli would also receive $112,000 in unpaid wages.
Pittsburgh Brewing is contesting a $2.7 million claim by the Pittsburgh Water and Sewer Authority. The agency's threat to terminate service over unpaid bills triggered the brewery's decision to seek bankruptcy protection Dec. 7.
The brewery also is contesting the Pension Benefit Guaranty Corp.'s $1.8 million claim over a terminated pension plan; a $309,500 claim by the Internal Revenue Service; $120,000 of an $814,400 claim for unpaid federal excise taxes filed by the U.S. Alcohol & Tobacco Tax & Trade Bureau; $136,100 in claims by the Pennsylvania Department of Revenue; and a $38,200 claim for Allegheny County real estate taxes.
Unsecured creditors have filed claims in excess of $18 million, but the brewery estimates legitimate claims at $6 million, a figure the 33-cent-on-the-dollar payout is based on. Robert Sable, attorney for the unsecured creditors, declined comment, saying he wanted to review the plan with his clients.
The brewery provided estimates of its financial results based on the reorganization plan. It projects losses of $1.6 million this year and $347,000 next year before turning profits of $575,000 in 2008 and $1.1 million in 2009.
Thanks to Len Boselovic