A fight is brewing for control of Hawaii Nui Brewing LLC about a week after the Hilo beer maker filed for bankruptcy.
Three affiliated creditors, which include the brewery’s landlord and a firm that sold Mehana Brewing Co. to Hawaii Nui four years ago, want a U.S. Bankruptcy Court judge to remove Hawaii Nui’s managers and sell off the company’s assets to repay creditors.
Mehana Investments Inc., Hilo Soda Works Inc. and Dustin Shindo filed the motion Friday, asking that Hawaii Nui’s Chapter 11 reorganization case be converted to a Chapter 7 liquidation.
“The debtor has no prospects for a reorganization under Chapter 11, much less a successful one,” the motion says.
Hawaii Nui, which generates about $1 million in annual sales, lost money in each of the past six years, accruing a $1.7 million deficit over that period, the company reported in its Chapter 11 filing.
Friday’s motion claims that Hawaii Nui’s attempt to reorganize is a bad-faith move that would benefit the company’s owners at the expense of creditors.
The three creditors also criticized a Hawaii Nui idea to raise money by selling stock as a “pipedream” and accused the company’s operators of “gross mismanagement.”
Hawaii Nui produces two beer brands it acquired from local companies established in the 1990s: Keoki Brewing Co. and Mehana Brewing.
Hawaii Nui was founded in 2007 to acquire Kauai-based Keoki, which was re-branded under the Hawaii Nui name. Mehana was added in a 2009 merger and maintains its brand name and its base in Hilo.
Hawaii Nui filed bankruptcy April 9 with estimated assets valued between $100,000 and $500,000, and debts between $1 million and $10 million.
The company has arranged to borrow $250,000 to stay afloat while it crafts a turnaround plan. A recently created company, Hawaii Ohana Brewing LLC, was formed to lend the emergency cash.
Ohana Brewing also intends to seek ownership of Hawaii Nui by counting its $250,000 loan as a purchase price. However, any other entity willing to bid more can do so at an auction slated for May 20. A sale is subject to approval from a bankruptcy judge.
Mehana Investments, Hilo Soda and Shindo object to Hawaii Nui’s plan, arguing that Ohana Brewing was formed by the principals of Hawaii Nui: Andy Baker and Nina Lytton. The creditors said Lytton negotiated both sides of the loan.
Hawaii Nui has said it unsuccessfully attempted to find other investors to keep the company operating but was forced to file bankruptcy and arrange emergency cash to avoid being evicted from its brewery building by Hilo Soda.
As part of the merger with Mehana Brewing, Hawaii Nui stopped bottling its beer in California and began producing Hawaii Nui and Mehana beer at Mehana’s Hilo production facility leased from Hilo Soda, a company led by Calvin Shindo, father of Mehana founder Dustin Shindo.
Hilo Soda claims that Hawaii Nui hasn’t paid rent since June on a lease that expired at the end of last year. Hilo Soda said it is owed about $85,000, and filed a lawsuit last year to evict Hawaii Nui. The microbrewery filed for bankruptcy a day before a scheduled trial in the eviction case.
Dustin Shindo’s Mehana Investments also sued Hawaii Nui recently to collect a debt related to the breweries’ merger. Through the merger, Shindo acquired a 50 percent stake in Hawaii Nui that Hawaii Nui agreed to buy back for $350,000. Hawaii Nui made an initial $49,000 payment but now owes $340,806 with fees. In February, Shindo’s firm filed a foreclosure lawsuit seeking to repossess Hawaii Nui assets secured by the buyback obligation.
Shindo, Mehana Investments and Hilo Soda said in their motion that Hawaii Nui is grossly mismanaged, and said Mehana was profitable in two of the prior three years before the merger with Hawaii Nui.
Hawaii Nui said in a filing Monday that the losses were in part due to disagreements among its owners, including Mehana. The company also said Calvin and Dustin Shindo were on Hawaii Nui’s board until mid-2011.
