New owners of Pittsburgh Brewing to take over July 7

By Joe Napsha
TRIBUNE-REVIEW
Tuesday, June 5, 2007

Pittsburgh Brewing Co.’s 18-month journey through bankruptcy court ended today when a federal judge approved a reorganization plan that gives the brewery new owners and new source of money to modernize.

U.S. Bankruptcy Judge M. Bruce McCullough today gave his stamp of approval to a plan that was approved last month in a nearly unanimous vote. All groups of creditors — those whose debt was secured by liens and those who debts were unsecured — approved the reorganization plan, said Robert O. Lampl, Pittsburgh Brewing’s attorney.

Commenting on the successful reorganization of the bankrupt brewery, McCullough said that when he took the case in December 2005, “I did not think we would be here today.” He added a cautionary note, saying, “I don’t know how long it will last.”

The new ownership group, led by Connecticut equity fund manager John N. Milne, will take over on July 7, not Thursday, as it had been proposed in the reorganization plan. The new owners need additional time to get permits from the Allegheny County Health Department and wrap up other details related to the bankruptcy, said Joel Walker, attorney for Pittsburgh Brewing Acquisition LLC., the company that will fund the brewery.

Milne’s group convinced creditors to accept a repayment plan that will offer creditors no more than $5.03 million, on claims that totalled more than $26 million. If the plan failed and the brewery were liquidated, the creditors might not receive any repayment, Pittsburgh Brewing said.
The 147-year-old Lawrenceville brewery, maker of Iron City, IC Light and Augustiner brands, will be operated under the name of Iron City Brewing Co., Walker said.

The ownership group has promised to invest about $4.1million to modernize the brewery, including a new kegging line and boiler. In addition, increased marketing efforts will be launched to promote the brewery’s brands, which include Iron City, IC Light, Golden Lager and Augustiner, said Timothy Hickman, who will become the brewery’s president next month.

“It gives us optimism and we’re hoping for great things,” said George Sharkey, a negotiator for the local unions representing the brewery’s 150 bottlers and brewers.

Pittsburgh Brewing President Joseph Piccirilli, who bought the brewery in bankruptcy court in 1995 for $29.4 million, did not attend today’s hearing and declined a request for a comment. Piccirilli will serve as a consultant for three months after the sale, but will not play a long-term role in the management of the brewery, according to the court-approved plan.

The brewery filed for bankruptcy on Dec. 7, 2005, after the Pittsburgh Water & Sewer Authority threatened to shutoff its water over an estimated $2.5 million in unpaid water and sewage bills. Operating under Chapter 11 of the bankruptcy code, the brewery was able to withhold paying debts prior to its bankruptcy filing, while it continuing to operate.

But, even after being relieved of those old debts, the brewery has struggled. Production was slowed last month because the brewery did not have sufficient funds to pay for the raw materials to make beer. Brewery attorney Robert O. Lampl said suppliers wanted to be paid in cash for their products.

The brewery’s reorganization plan is based on receiving public funding from a combination of state, Allegheny County, City of Pittsburgh . The new owners say they want $250,000 grant and low-interest loans of $500,000 in low-interest loans from government sources within the first two years of its operation.

Milne’s group says that new efforts in marketing can boost sales of the brewery’s Iron City, IC Light and Augustiner brands to $30.5 million in its first full year of operation. The brewery’s revenues were $27 million through the first 10 months of 2005.

A beer industry expert believes a new management can succeed in reviving Pittsburgh Brewing.

“The brand equities on those beers (Iron City and IC Light) are just phenomenal. They can tap into some really strong trends right now ,” said Daniel Bradford, publisher of All About Beer magazine in Durham, N.C.

One of those trends is what Bradford calls the “retro trend” — the popularity of older beer brands among young adults in their 20s. “Retro is cool.”

Pittsburgh Brewing’s new owners also can tap into the “support your local brewery” movement among beer drinkers, Bradford said.

The new ownership group also has an opportunity to create a specialty beer segment, a whole new brand they can roll out within their existing market, and add value to the business, Bradford said. Brewers such as High Falls Brewing Co. of Rochester, N.Y., which brews the Genesee family of beers, along with the Matt Brewing Co. of Utica, N.Y., and City Brewing Co. of La Crosse, Wisc., which bought the former Latrobe Brewing Co. plant, are among such success stories.

“It’s not just an extension of Iron City. It is thinking more along lines that reflect the indigenous culture of Western Pennsylvania,” Bradford said.

“It is not just a question of (spending) money. You have to be strategic and you have to execute it well,” Bradford said.

“They need to be very judicious. They are just sitting on a gold mine,” Bradford said.

Joe Napsha can be reached at jnapsha@tribweb.com or (412)-320-7993.