A craft brewery with strong operations, loyal customers, and a brand worth fighting for — buried under $6.51 million in debt it could no longer service. The underlying business was viable. The capital structure was not.
This is not a client engagement — it is ours. Before founding Lautertun Partners, the founding team executed this restructuring for their own company, navigating every stage of the process firsthand: lender negotiations, Article 9 mechanics, SBA workout proceedings, the operational transition, and the personal guarantee resolution process that is still ongoing. We founded Lautertun Partners to bring that experience to clients facing similar situations — because we have been on the other side of this table.
Craft breweries are capital-intensive businesses built on optimism. Equipment is expensive, facilities are expensive, and demand is notoriously difficult to forecast. The company took on significant debt to survive pandemic-era revenue shutdowns and to fund a 30,000-barrel production expansion that made sound economic sense when it was committed. By the time the facility opened, the growth assumptions had shifted.
The problems compounded over time. Floating-rate debt caused effective interest costs to nearly double as rates rose through 2022–2023. Revenue stabilized below pre-COVID projections, eliminating the coverage ratios that had made the debt serviceable at origination. Rising commodity costs — grain, packaging, utilities — squeezed operating margins at exactly the moment debt service was increasing. The fixed-cost structure of a scaled production facility created operating leverage that worked powerfully in reverse.
None of this destroyed the underlying business. The brand was strong. The customer base was loyal. The team was experienced. What the company had was a capital structure problem — and capital structure problems require fundamentally different solutions than operational ones.
The Article 9 UCC disposition offered something none of the conventional options could: a private, out-of-court process to transfer all assets to a clean entity — free of all prior claims — without a single public court filing.
| Obligation | Principal | Resolution Mechanism | Outcome |
|---|---|---|---|
| Senior secured bank debt First-position lien on brewery equipment and assets |
$3,640,000 | Negotiated settlement — lender's collateral recovery under forced liquidation was materially impaired; brewing equipment trades at approximately 5 cents on the dollar in the secondary market after removal and transport costs | Settled: $50,000 |
| SBA EIDL direct loan Personal guarantee — OIC in process |
$2,150,000 | SBA Offer in Compromise filed; personal guarantee exposure being resolved directly with the SBA | Max: $172K over 5 yrs |
| Trade payables — critical vendors Suppliers essential to continued operations |
$89,000 | Paid in full on a structured payment plan funded from operating revenue — maintaining relationships essential to the business | Paid in full |
| Trade payables — remaining AP General unsecured creditors |
$632,000 | Extinguished by operation of the Article 9 disposition; proper UCC notice provided to all subordinate creditors | Extinguished: $0 |
| Total | $6,511,000 | See below |
The SBA's OIC process governs resolution of both direct SBA loans (EIDL) and personal guarantees on SBA 7(a)-backed obligations. Aggregate personal guarantee exposure from both SBA obligations — originally $5.79 million — has been capped at a maximum of $460,000 payable over five years through the OIC process. Active negotiation targeting further reduction is ongoing. The OIC process works directly with the SBA and typically takes 12–24 months to reach final resolution. This is not a fast process, but it is a defined one — with a known ceiling and a clear path to finality.
Article 9 of the UCC governs secured creditor remedies. When a senior secured lender agrees to sell — rather than foreclose on — collateral, that disposition can transfer all business assets to a new acquiring entity free and clear of all subordinate claims. The result is a legal, structured, entirely private alternative to Chapter 11 that leaves no public record and preserves every relationship the business has built.
The senior lender held a first-position lien on brewery equipment — but the secondary market for brewing equipment had collapsed. Most assets now trade at approximately 5% of original purchase price, and that assumes a buyer exists. After accounting for rigging, removal, transport, and legal disposition costs, a forced liquidation would have yielded a net recovery materially below the $50,000 cash settlement we offered.
The negotiation required a thorough collateral analysis — demonstrating to the lender, with specificity, that their position was weaker than they understood. Lenders default to aggressive postures; the job is to change the calculus. The $50,000 settlement represented the lender's optimal recovery. That argument won.
A new entity was formed to serve as the acquirer of all business assets through the Article 9 process. The acquiring entity purchases assets free and clear of all prior liens, claims, and encumbrances — which is the mechanism by which the trade payables and subordinate obligations are extinguished. The structure required coordination between the acquiring entity, the senior lender, and legal counsel to ensure proper UCC notice to all subordinate creditors.
The Article 9 disposition was executed with proper UCC notice to all subordinate creditors, legally extinguishing $632,000 in general unsecured trade payables. All business assets — equipment, intellectual property, licenses, inventory, accounts — transferred to the new entity. Operations continued on day one under the same management team, the same locations, and the same brand. Customers, employees, and distributors saw no disruption.
Unlike Chapter 11, which requires public court filings visible to any competitor, distributor, or consumer who searches the bankruptcy dockets, the Article 9 disposition generated no public record of any kind.
SBA-backed obligations — both the EIDL direct loan and personal guarantees on SBA 7(a)-backed debt — cannot be discharged through Article 9. They follow the individuals, not the entity. The SBA's Offer in Compromise process is the correct tool: a structured negotiation with the government directly, working toward a settled lump-sum or installment payment that permanently resolves personal liability.
OIC filings were prepared and submitted for both obligations. The SBA's most recent counter-proposal establishes an aggregate maximum of $460,000 payable over five years — a 92% reduction from the $5.79 million in original SBA-related exposure. Negotiations toward a lower final figure are ongoing. The process typically resolves over 12–24 months from filing.
The Article 9 process works when three conditions are present: a senior secured lender whose collateral position is weaker than they believe, a viable underlying business worth preserving, and advisors who understand both the UCC mechanics and the lender negotiation dynamics well enough to execute.
The window for this kind of resolution is narrow. Once a lender accelerates and pursues default remedies aggressively — or once the SBA charges off a loan and refers it to its Office of Credit Risk Management — the available options narrow significantly and the cost of resolution rises. The earlier this process begins, the better the outcome.
We know this because we have been through every stage of it. Not as advisors. As principals.
If your operations are sound but your balance sheet is not, there may be more options than you think — and more time pressure than you realize. A free, confidential conversation costs nothing and often changes the trajectory of a situation significantly.