Vodka seller Central European Distribution Corp. (CEDC), headed by Russian billionaire Roustam Tariko, filed for U.S. bankruptcy protection amid heavy bond debt and with a pre-approved restructuring plan aimed at cutting about $665.2 million in liabilities.
The company, based in Warsaw, lists a U.S. address in Mount Laurel, New Jersey. It claimed $1.98 billion in assets and $1.73 billion in debt in filings yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Its shares fell as much as 47 percent on the Nasdaq Stock Market.
CEDC said in February that it had proposed a debt-for- equity plan to reduce liabilities by more than $750 million. The company’s immediate financial crisis involved $257.9 million in 3 percent convertible notes that matured March 15.
The company said yesterday in a statement that holders of existing 2016 notes will receive $822 million, consisting of $172 million in cash, $450 million in new secured notes and $200 million in new convertible notes -- an estimated recovery of about 83.7 percent.
The maker of Bols vodka lost about 50 percent of its market value in 2012 amid slumping sales, rising debt and management transitions. After saying it may not be able to pay back debt, CEDC signed an agreement July 9 with Tariko’s banking and vodka group Russian Standard Corp., making the billionaire a nonexecutive chairman and allowing him to boost his stake in CEDC in return for buying debt to avoid default.
CEDC plunged 45 percent to about 18 cents at 10:45 a.m. New York time after touching a record low of 17 cents. The shares reached $77.48 in July 2008, according to data compiled by Bloomberg.
CEDC traces its roots to 1991 as the exclusive importer of Anheuser-Busch (ABI) beer in Poland, according to its website. In 1998 it went public in New York with 2 million shares, and in 2005 it began distilling vodka. CEDC then expanded into Hungary, Russia and Ukraine.
The company said in its bankruptcy petition that it’s the largest integrated spirits beverage business by volume in central and Eastern Europe.
With “overwhelming support” from creditors, the company said in yesterday’s statement that its recovery plan includes a new $100 million unsecured loan from an affiliate of Alfa Group. The restructuring doesn’t involve operating subsidiaries in Poland, Russia, Ukraine or Hungary, according to the release.
Among the company’s largest unsecured creditors listed in court papers are the noteholders and defunct U.S. law firm Dewey & LeBoeuf LLP, owed $2.45 million in legal fees.
The company’s financial challenges surfaced after almost two decades of success in Poland. CEDC expanded into Russia just as Poles began drinking less vodka and Russia raised taxes and costs to discourage alcohol consumption. The global financial crisis, a 37 percent collapse in Russia’s currency, and accounting errors exacerbated the situation.
Russians drank less vodka in 2011 than they did in 2008, while Poles cut back by 7.7 percent, based on volume sales compiled by International Wine & Spirit Research, known as IWSR.
CEDC co-founder William V. Carey, who resigned in July as chief executive officer, is a University of Florida economics graduate who moved to Poland after unsuccessfully pursuing professional golf. He set up a company in 1990 exporting cattle, then moved into the more lucrative business of importing beer to Poland.
The case is In re Central European Distribution Corp. (CEDC), 13- bk-10738, U.S. Bankruptcy Court, District of Delaware (Wilmington).