By HUNTER BISHOP
By HUNTER BISHOP
Tribune-Herald staff writer
Hilo’s Hawaii Nui Brewing LLC went into bankruptcy court earlier this month, aiming to get its bailout plan approved. The maker of Mehana beer hopes that a last-minute cash infusion will persuade the court to keep the company afloat.
But one of Hawaii Nui’s creditors says the cash bailout isn’t enough to take the company out of bankruptcy, and that it’s an insider deal designed to protect Hawaii Nui Brewing’s owners, not the company’s creditors.
On April 12, the court approved emergency cash advances to Hawaii Nui Brewery of up to $250,000 from the newly created Hawaii Ohana Brewing Co., but creditors Mehana Investments Inc. and Hilo Soda Works objected to the finance deal in a motion filed recently.
Mehana and Hilo Soda Works alleged that the bailout company set up to rescue Hawaii Nui Brewery was formed less than 24 hours before filing for bankruptcy and isn’t offering enough money to retire the debt and keep the company in business. They also allege that a principal in the Hawaii Nui Brewing firm, Nina Lytton, is also a principal in the newly formed bailout company, Hawaii
Ohana Brewing, and that she negotiated the loan agreement for both sides.
Shindo and his father, Calvin, control Hilo Soda Works and Mehana Investments Inc. and founded Mehana Brewing in 1995 at the East Kawili Street location.
Hawaii Nui was founded in 2007 by former employees of Kona Brewing Co., Anthony K. Baker and Keith Lindsey, and Lytton. In 2009, Hawaii Nui Brewery relocated its operations from Kauai and merged with Mehana Brewing Co. Mehana Tea Co., owned by Dustin Shindo, acquired 50 percent of Hawaii Nui Brewery, which leased the warehouse from Hilo Soda Works.
The Shindos now want the court to change the Hawaii Nui Brewings’ bankruptcy filing from Chapter 11, a reorganization of the company with restructured debt, to a Chapter 7 in which the company is liquidated to repay its creditors.
“(Hawaii Nui Brewery) does not have a viable business to reorganize,” the Shindos told the court. When the bankruptcy case was filed, “Hawaii Nui Brewery had $8,038 in cash, about $1.1 million in secured debt and about $533,000 in unsecured debt.”
With continuing operating losses, the recent infusion of cash will not be enough to keep the company afloat, they alleged, and the newly formed LLC providing the loan was arranged by “company insiders.”
Baker and Lytton, principals in Hawaii Nui Brewery, are also principals in the bailout firm, the Shindos noted. “The blatant self-dealing engaged in by the Debtor’s insiders in this case is a breach of their fiduciary duties owed to creditors.
“Furthermore, the debtor’s pipe dream of ‘raising capital’ by selling stock during its Chapter 11 case has no basis in reality.”
“The debtor’s budget shows a lack of a reasonable likelihood of rehabilitation,” said the filing from Johnathan C. Bolton, attorney for the Shindos. Chuck C. Choi, attorney for Hawaii Nui Brewing, would not speak on the record about the case.
According to documents filed by attorneys for Hawaii Nui Brewing, the bankruptcy was filed to stop the beer-maker from being evicted from its offices, bottling plant, retail outlet and tasting center at 275 East Kawili St. Hilo Soda Works claims Hawaii Nui Brewing owes approximately $59,000 in back rent to the warehouse.
Hawaii Nui Brewing has operated at a net loss each year since 2007, totaling $1.3 million, even though revenues have increased steadily from $430,539 in 2007 to $1.41 million in 2012, according to court documents.
A hearing is set May 20 in federal bankruptcy court in Honolulu.
Email Hunter Bishop at hbishop@hawaiitribune-herald.com.