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By Miriam Raftery
October 27, 2012 (El Cajon) – The El Cajon Brewing Company has filed for Chapter 11 bankruptcy, but the owner says the restaurant aims to reorganize and stay in business.
The brewery has received at least $645,000 in funds from the City of El Cajon, including $300,000 in start-up funds approximately three years ago, followed by a $345,000 loan borrowed from redevelopment funds to complete the renovation, the U-T San Diego reported in April 2011.
Asked what the bankruptcy could mean for the city, Councilman Gary Kendrick told ECM, “This is a bankruptcy reorganization, so hopefully they will be able to reorganize their debt and continue operation or find another operator. The city has a lien on their equipment as security for the loan. The value of the equipment would cover a significant part of the unpaid loan balance.”
In addition, Kendrick observed, “The State of California took over all the Redevelopment Agency's assets earlier this year when it ended redevelopment statewide. Since the loan was from the redevelopment agency the money is actually owed to the State of California. The brewery is current on its loan payments to the city.”
While some local business owners testified against the loan, predicting the brewery was likely to fail, Mayor Mark Lewis along with Council members Jillian Hanson-Cox and Gary Kendrick voted for the loan; Council members Bob McClellan and Bill Wells voted against lending money to the brewery.
A post from the El Cajon Brewing Company has been published at the Beer Advocate website,offering some reeassurance to taxpayers. “Just to clarify, we are not in default with the city, nor do we intend to be so with them or any of our other creditors in the future," the post indicates.
The bankruptcy filing was made by Sasan Mirkarimi Esq. of Mirk Law Group, PLC on behalf of Downtown El Cajon Brewery Co. Inc.
East County Magazine held a fundraising event in September at the El Cajon Brewing Company, which donated a portion of proceeds to benefit our nonprofit news and wildfire alerts. ECM was unaware of the impending bankruptcy, however the brewery did honor its commitment and made the donation as pledged.
The brewery subsequently held an anniversary party on October 20, shortly after filing for Chapter 11. Soon after, El Cajon Brewing Co. posted online: ”We were very disappointed however that the NO ONE from the CITY HALL attended the celebration. We were further disappointed that they REFUSED to even announce our anniversary on their public media email list.”
Later, the company backed off. In a message to customers and friends, the company apologized for its earlier post, adding, “El Cajon Brewing Co is very dedicated to promoting this fine city of El Cajon. The city approached us with a loan in a joint desire to help this town prosper. We are only disappointed in the sense that helping us could help them with their redevelopment of Downtown El Cajon, for which we have been dedicated to ...for the past 2+ years.”
Brothers Stephan and David Meadows founded the brewery, where David served as brew master and Stephan as CEO. David has left posts at the Beer Advocate website claiming he was forced out of business by his brother and replaced by a busboy trained as assistant brew master.
“What I really want to do is apologize to the City of El Cajon, The San Diego brewing community, the Guild, Quaff members and all the breweries etc. for my "brother’s" behavior,” David wrote. http://beeradvocate.com/community/threads/el-cajon-brewing-company-chapter-11.45577/ )
Asked for comment for this article, Stephan Meadows forwarded a formal statement issued to customers and business associates from the El Cajon Brewing Company's management. It states, "It has come to our attention that there is a rumor going around claiming that ECBC is in financial trouble and about to go under. We, here at ECBC want to assure you all, that ECBC is doing very well for it's first year in business and we look forward to serving you for many more years to come.
However, as with many new businesses, we found that we needed more time to catch up with paying off all the costs incurred in establishing the restaurant and brewery. On that note, we have decided to file for a reorganization under Chapter 11 of the Bankruptcy code. Under a reorganization, the court establishes a payment schedule for the company's creditors that is more in tune with the income of the company. This allows the company to continue doing business and assures all creditors are paid.
We look forward to seeing you and serving you again."
Comments
Something Doesn't Sound Right
I love El Cajon Brewing Company, but something doesn't sound right. I decided to do a little checking.
In a Chapter 11 bankruptcy, the court doesn't simply set a payment schedule. The debtor must submit a plan that creditor will eventually be able to vote on. So far, ECBC hasn't submitted a plan and they are already on their second law firm in their bankruptcy.
The bankruptcy came before the trial in the eviction lawsuit filed by the landlord. I didn't see anything in the bankruptcy filing to show that ECBC had started to pay rent at all. The bankruptcy filings make a vague reference to the loss of a brewer, but it isn't even clear if they have a replacement brewer.
I hope they can come up with a plan of reorganization that is acceptable to the court and creditors, but only time will tell.