Why This Matters to Distributors: Republic National Distributing Co. has cleared two important hurdles in its Chapter 11 case, winning court approval for the sale of its 17-state Control States business and advancing a bankruptcy plan that would govern the remaining wind-down. The next major step is an Oct. 22 confirmation hearing.
Republic National Distributing Co. is moving closer to completing the breakup of its distribution network after a bankruptcy court approved another asset sale and cleared the company to seek creditor approval of its Chapter 11 plan.
The U.S. Bankruptcy Court for the Southern District of Texas on Sept. 18 approved the sale of all RNDC’s Control States brokerage assets to Martignetti Companies. The transaction covers operations serving 17 states and calls for Martignetti to pay $14.5 million in cash, plus the cost of eligible inventory and the assumption of certain liabilities.
The sale is the latest step in the month-long dismantling of RNDC, once one of the country’s largest wine and spirits distributors.
RNDC filed for Chapter 11 bankruptcy protection July 26 to pursue additional sales and conduct what the company described as an orderly wind-down of its remaining operations. RNDC said at the time that it would continue seeking buyers for additional markets while winding down businesses where no prospective buyer emerged.
The company is not using Chapter 11 to reorganize and emerge with its former distribution network intact. Its bankruptcy plan calls for the remaining businesses and assets to be sold or liquidated and proceeds distributed through the bankruptcy process.
The Martignetti transaction was particularly important because RNDC was running against a liquidity deadline. In its sale request, RNDC told the court it needed to complete the Martignetti transaction or another market sale during the week ending Sept. 25 to maintain the minimum liquidity needed to sustain operations. The company said the Control States transaction was its most advanced sale and the only one it expected could close within that period.
Martignetti had been pursuing the business for months. The companies announced in May that they had reached an initial agreement covering RNDC’s Control States operations in Alabama, Idaho, Iowa, Maine, Michigan, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, West Virginia, and Wyoming.
RNDC’s investment banker, Lazard, contacted more than 50 potential buyers and entered confidentiality agreements with more than 25 during the sale process, according to bankruptcy filings. Martignetti submitted the only actionable proposal to acquire the Control States business as a single package. The companies originally expected to complete the transaction outside bankruptcy. RNDC said deteriorating liquidity prevented that from happening, forcing the sale into the Chapter 11 process.
Under the court-approved agreement, Martignetti will pay $14.5 million in cash plus the cost of saleable vendor inventory, which was estimated at about $2 million as of July 31. RNDC estimated its bankruptcy estates would receive more than $11 million in net proceeds after payments to nondebtor sellers and transaction expenses.
The sale also provides for all employees associated with the Control States business to transition to Martignetti, according to court filings. The transaction follows other moves that already have reduced RNDC’s former footprint.
RNDC completed the transfer of 11 markets to Reyes Beverage Group in May, including Arizona, Colorado, Florida, Louisiana, Maryland, Oklahoma, South Carolina, Texas, Virginia, and Washington, D.C. The Hawaii portion remained subject to regulatory approvals when that transaction was announced as completed.
RNDC also completed a June transaction with Columbia Distributing involving key brand distribution rights in Oregon and Washington. RNDC said when it filed for bankruptcy that transactions completed before the Chapter 11 filing had preserved more than 5,000 jobs.
The company’s focus now shifts increasingly toward its Chapter 11 plan.
RNDC filed its first amended plan and amended disclosure statement Sept. 10. The bankruptcy court conditionally approved the disclosure statement that day and authorized the company to move forward with the solicitation process.
The court has scheduled a combined hearing on final approval of the disclosure statement and confirmation of the Chapter 11 plan for Oct. 22 at 1 p.m. Central time in Houston.
Creditors have until Oct. 9 at 4 p.m. Central time to file most proofs of claim.
The proposed plan includes settlements with RNDC’s ownership groups that would contribute $50.25 million in cash to the bankruptcy estates and eliminate certain claims held by those parties. Those arrangements are part of the amended plan and remain subject to the bankruptcy process.
If the plan is confirmed, the case will move further from operating RNDC’s remaining businesses toward completing asset dispositions, resolving claims, and distributing the value left in the bankruptcy estates.
Not all RNDC-related businesses are part of bankruptcy. National Distributing Co. is not a debtor, and RNDC said its joint ventures in New York, Illinois, Ohio, Michigan, Indiana, and Kentucky also were excluded from the Chapter 11 filing. Its Alaska joint venture was included.
The immediate question is whether RNDC can complete its remaining transactions and wind-down work on schedule as it approaches the Oct. 22 confirmation hearing.
What is already clear is that Chapter 11 is accelerating a restructuring of the U.S. beverage alcohol distribution landscape that began before RNDC entered bankruptcy. Businesses and distribution rights once controlled by RNDC have moved to other distributors, and the company’s remaining operations are being sold or wound down rather than rebuilt as a national network.
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