Minnesota Brewing declares bankruptcy, plans restructuring

by Elizabeth Putnam

Citing financial strains and equipment deficiencies, the Minnesota Brewing Company finalized Chapter 11 bankruptcy claims and began planning the company’s reorganization Tuesday.

If successful in the U.S. Bankruptcy Court, the company will receive federal protection against creditors. The alternative, claiming Chapter 7 bankruptcy, would cause a liquidation of the company and the loss of 185 jobs.

The brewing company is able to stay afloat only because of a $3 million loan from the Gopher State Ethanol plant. Both the plant and Minnesota Brewing are owned by MBC Holdings.

“If we did not receive the money from the ethanol plant, we would have to close,” said Jack Lee, company president and CEO of MBC Holdings, the Minnesota Brewing parent company.

Minnesota Brewing, located on St. Paul’s West Seventh Street, brews Grain Belt Premium, Pig’s Eye Lager, Brewer’s Cave and Yellow Belly.

The brewery’s downfall began last year after a $5.4 million equipment purchase to accommodate incoming bottling contracts.

Lee said despite an increased bottling demand, equipment failure in the bottling line caused a decrease in production and $3 million loss last year.

“We upgraded our equipment, but the equipment just did not perform to what we needed,” Lee said.

The brewery sought a $2 million loan agreement from the city of St. Paul to avoid shutting down, but the proposal was denied by the City Council’s credit committee.

Financial negotiations between the city and the brewery are currently on hold, but some St. Paul officials said they want to help save the brewery.

St. Paul Mayor Randy Kelly and City Council member Chris Coleman have pledged support and are working to find alternative financial backing.

In a statement released last month, Kelly said the city will work with MBC for two months to protect jobs despite controversy over the risks the ethanol plant poses to neighboring citizens.

Since the plant opened next to Minnesota Brewing in 2000, the city of St. Paul and several residents have filed lawsuits, claiming dangerous emissions of carbon dioxide.

The city’s suit was settled in December 2001, and Coleman said the plant has taken steps to reduce environmental hazards.

But local residents aren’t as optimistic.

“The plant has caused residents to throw up in the streets, and the noise causes them to wake up during the night,” said Andy Driscoll, who lives near the plant.

Driscoll, who is also a spokesman for Citizens Alliance for a Safe Environment, said CASE filed a lawsuit against the plant last year.

Although Driscoll said he does not have any qualms against MBC, he said he doesn’t think the city should help fund the brewery.

“It would be good money going to a lost cause,” Driscoll said.

Minnesota Brewing formed in 1991 after a group of investors bought the facilities from G. Heileman Brewing Company of La Crosse, Wis.

But the site has been home to breweries since 1855 when Cave Brewery opened. The company was sold around the turn of the century. It survived Prohibition by brewing non-alcoholic beers.

Lee would not elaborate on the company’s plans for rehabilitation. He said any personnel cuts would occur in administration before affecting those working on the line.

He said the company will have to upgrade equipment to maintain production.

“The $3 million is just a bridge to keep us open,” Lee said. “We will have to continue restructuring.”

Elizabeth Putnam welcomes comments at [email protected]