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Crushpad Asset Sale Planned, Private Equity Firm In The Bidding

July 27, 2012 | Filed under Featured Articles | Posted by

Crushpad’s board of directors Thursday assigned the company to Sherwood Partners, the same Mountain View asset disposition company used by New Vine Logistics and MyWines Direct. Sherwood has scheduled a sale of Crushpad’s assets on Aug. 7.

Tiburon-based CastleGate Capital Advisors, which has purchased the company’s debt from Silicon Valley Bank, hopes to be the successful bidder in that sale, according to firm founder Philip Von Burg who said he has been working with Crushpad to come up with a plan that will avoid liquidation and allow clients to obtain their wine.

According to an email sent to Crushpad clients and investors, Sherwood “has retained a skeletal crew to protect the quality of the wine in barrel in the interim. This move is to protect all Crushpad creditors, including you, while a go forward solution is determined.”

In addition, the email said that Sherwood “has retained a skeletal crew to protect the quality of the wine in barrel in the interim. This move is to protect all Crushpad creditors, including you, while a go forward solution is determined.”

The email was sent from former Crushpad operations director Steve Ryan who wrote that

Moreover, I am no longer in the employ of Crushpad and am acting on a consultant basis between the legal process surrounding Crushpad, the secured lender, and my partners that would like to see all clients receive the wine made at Crushpad. I am committed to helping us all work through this avenue and am open to further discussion with complete transparency.

Sources familiar with the transaction said that clients will most likely be asked to pay additional amounts in order to obtain wine they have already paid for. “They [clients] have to realize that because of regulations and other contract terms, they don’t really own their wine yet.”

The Crushpad email explained that the company has a complicated structure that includes “a secured lender, junior secured lenders, growers (some with producer liens on the juice in barrel), trade creditors (suppliers for barrels and packaging materials), customers with unfinished barrels and deposits paid for the 2012 vintage.”

Sources said that funds received from clients “has long been spent” and is not available to pay those creditors.

If CastleGate is not successful liquidation is a possibility as is clients’ potential loss of their wine.

ASSIGNMENT FOR THE BENEFIT OF CREDITORS

The process that will be used is known as an Assignment for Benefit of Creditors (ABC) . The technique, as explained by the Cooley law firm website (which handled the New Vine Logistics liquidation), is considered faster and less expensive than a federal bankruptcy or state court receivership and eliminates their usual disclosure requirements.

NEW GROUP NOT ASSOCIATED WITH CRUSHPAD OR DIRECTORS

CastleGate, according to the email, “is not Crushpad and is not affiliated with the former Crushpad Directors. The group is also not a “white knight” that is willing to invest funds to settle all the debt of Crushpad. They are however willing to invest funds in collaboration with me and any clients that are interested in getting their wine as quickly and efficiently as possible and avoid the legal morass that is on the horizon.

RYAN LAYS OUT OBJECTIVES AND PRIORITIES

Our objective is to

•       Avoid liquidation of wine in inventory;

•       Provide customers and members an option for finishing and packaging the wine currently in barrel;

•       Maintain the Aspect Wines, LLC (Crushpad Commerce entity) licensed entity and continue to provide commercial brands with compliance and back office services; and

•       Finalize a solution for the 2012 Vintage.

The immediate priorities are:

Reestablishing fulfillment services.  Crushpad and Aspect will be unable to sell wine while the Assignee is in control of its assets until the sale.  I have negotiated a deal with Crushpad’s logistics provider that will allow Crushpad clients to pick up their case goods at the fulfillment center in so far as all past due balances and storage fees are paid.  Please contact me directly if you would like to make arrangements.

*Please consider – the staff at the fulfillment center has been extremely cooperative despite being owed significant amounts from Crushpad.  Because wine at the fulfillment center is held under the account for Crushpad they are unable to release wine to customers unless all customer past due amounts are brought current and CARL fees paid.  Calls to the logistics provider will be referred back to Crushpad or the Assignee.

 Bottling. Crushpad has temporarily ceased bottling operations. I am working on a plan to resume bottling and design services within the next 30 days, and expect to have a plan to communicate this option in the coming week.

Wine in Barrel.  All wine in barrel is under the care of winemaker, Patrick Saboe. I expect to have a plan of action to facilitate the completion of and/or delivery of wine in the coming week as well.

*Please consider Sebastiani is Crushpad’s landlord – they have no ability to do anything with the wine in barrel unless the tenant, Crushpad, contracts labor. Please do not contact Sebastiani or Foley Family Wines employees for questions. 

 2012 Vintage.  Many grower contracts are still in place, and I will be reaching out to all clients that have already contracted with Crushpad for the vintage to have further discussion next week.

 CASTLEGATE: WORKOUT AND DISTRESSED COMPANY EXPERTS

According to company information, CastleGate Capital Advisors “is an operations-focused private equity investor and provider of turnaround and interim management services for established, lower-middle market companies experiencing a transitional event:

  • Generational ownership change
  • Corporate Divestiture
  • Liquidity Crisis
  • Restructuring
  • Bankruptcy
  • Bank Default or Foreclosure
  • Fraud

The company was founded by Philip Von Burg a founding partner of Monomoy Capital Partners, a distressed equity fund, providing turnaround capital to lower middle market businesses. He’s a former  Managing Director at Arthur Anderson, and has more than 20 years of direct experience in providing restructuring, turnaround and crisis management services to underperforming, troubled and bankrupt companies.

PREVIOUS COVERAGE BY WINE INDUSTRY INSIGHT

COMPLETE EMAIL FROM CRUSHPAD

From: Steve Ryan <steve.ryan@crushpadwine.com>
Date: July 27, 2012
To: undisclosed-recipients:
Subject: Status of Crushpad, Inc.

Dear Crushpad Client,

As you are undoubtedly aware, Crushpad, Inc. (“Crushpad”) is experiencing a financial crisis.  Yesterday the Company’s Board assigned the Company to a third-party (the “Assignee”) who is running a sale process to maximize value for the Company’s stakeholders.  The sale of the Company’s assets is scheduled for August 7th.  The Assignee has retained a skeletal crew to protect the quality of the wine in barrel in the interim.  This move is to protect all Crushpad creditors, including you, while a go forward solution is determined.

In an effort to be clear and plain in this communication, it is important to understand the challenges currently faced by the Company. Crushpad’s creditors include a secured lender, junior secured lenders, growers (some with producer liens on the juice in barrel), trade creditors (suppliers for barrels and packaging materials), customers with unfinished barrels and deposits paid for the 2012 vintage.  Because of the complexity of the creditors and the potentially competing rights between these parties, liquidation of Crushpad is a real possibility. If the Company were to be liquidated, there is a risk that many clients will lose their wine.

To avoid liquidation, I have been working around the clock with a turnaround investment group to develop a plan to overcome the numerous operational and financial issues at the Company and they are positioned to buy the assets of the Company and take control of the wine at the Sale on the 7th.

It is important to recognize this entity is not Crushpad and is not affiliated with the former Crushpad Directors. The group is also not a “white knight” that is willing to invest funds to settle all the debt of Crushpad. They are however willing to invest funds in collaboration with me and any clients that are interested in getting their wine as quickly and efficiently as possible and avoid the legal morass that is on the horizon.  Our objective is to

•       Avoid liquidation of wine in inventory;

•       Provide customers and members an option for finishing and packaging the wine currently in barrel;

•       Maintain the Aspect Wines, LLC (Crushpad Commerce entity) licensed entity and continue to provide commercial brands with compliance and back office services; and

•       Finalize a solution for the 2012 Vintage.

The immediate priorities are:

Reestablishing fulfillment services.  Crushpad and Aspect will be unable to sell wine while the Assignee is in control of its assets until the sale.  I have negotiated a deal with Crushpad’s logistics provider that will allow Crushpad clients to pick up their case goods at the fulfillment center in so far as all past due balances and storage fees are paid.  Please contact me directly if you would like to make arrangements.

*Please consider – the staff at the fulfillment center has been extremely cooperative despite being owed significant amounts from Crushpad.  Because wine at the fulfillment center is held under the account for Crushpad they are unable to release wine to customers unless all customer past due amounts are brought current and CARL fees paid.  Calls to the logistics provider will be referred back to Crushpad or the Assignee.

Bottling. Crushpad has temporarily ceased bottling operations. I am working on a plan to resume bottling and design services within the next 30 days, and expect to have a plan to communicate this option in the coming week.

Wine in Barrel.  All wine in barrel is under the care of winemaker, Patrick Saboe. I expect to have a plan of action to facilitate the completion of and/or delivery of wine in the coming week as well.

*Please consider Sebastiani is Crushpad’s landlord – they have no ability to do anything with the wine in barrel unless the tenant, Crushpad, contracts labor. Please do not contact Sebastiani or Foley Family Wines employees for questions. 

2012 Vintage.  Many grower contracts are still in place, and I will be reaching out to all clients that have already contracted with Crushpad for the vintage to have further discussion next week.

There are several other priorities on the list, though I understand these are the burning questions for many and the most immediate needs to protect your experience and investment with Crushpad.

I recognize that this is not what any of us signed up for when we began our relationship with Crushpad.  Like you, I am a Crushpad client with wine in barrel – these last weeks have been challenging as I have been unable to communicate freely about finding a solution to Crushpad’s financial woes.  With the Assignee in place, I am now in a position communicate openly and provide answers to this very complex situation.

Moreover, I am no longer in the employ of Crushpad and am acting on a consultant basis between the legal process surrounding Crushpad, the secured lender, and my partners that would like to see all clients receive the wine made at Crushpad. I am committed to helping us all work through this avenue and am open to further discussion with complete transparency.

While the entire process has several moving parts, and is very intricate, to say the least, I will provide all that I can for you. Please do not hesitate to contact me to discuss, and I will be getting back to everyone in the order I receive inquiries.

Thank you,

Steve Ryan

steve.ryan@crushpadwine.com