Centennial Beverage files for Chapter 11 bankruptcy

Posted Tuesday, Dec. 18, 2012  comments  Print Reprints
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Centennial Beverage Group, which recently launched an "inventory liquidation" sale but said late last week that it was not shutting down, has filed for Chapter 11 protection in U.S. Bankruptcy Court in Dallas, its attorney said Tuesday.

In court filings, Centennial said it owed more than $10 million to lenders, including Spanish-owned BBVA Compass Bank, and creditors such as Glazer's and Republic, both large liquor and wine distributors in Dallas.

The petition did not tally total liabilities. But its attorney, Robert D. Albergotti of Haynes and Boone, said Centennial would restructure without the need of traditional debtor-in-possession borrowing, saying it had sufficient cash flow to see it through the closing of some stores and operating the remaining retail outlets.

The number and location of stores to be closed have not yet been decided, Albergotti said. Centennial expanded in 2011 by acquiring the Majestic stores out of bankruptcy.

"Centennial is in pretty good shape for a company going into bankruptcy," he said in a telephone interview. "We don't need any financing. We have adequate cash on hand and forecasting sufficient cash flow."

In fact, Albergotti said the widely promoted warehouse sale brought in $2.7 million for the week ending Saturday while the company had expected sales of $2.3 million.

The 76-year-old chain was run for decades by Jim Vandeveer, then his daughter, before being sold in March 2010 to an investment group, VEI Miller Acquisition II LLC, led Doug Miller, the chairman and CEO of Exco Resources, a Dallas-based oil and gas company..

Centennial under Vandeveer had acquired the Big Daddy chain in 2000. In early 2011, the chain now controlled by Miller took over bankrupt Majestic Liquors, which industry observers said had taken on far too much debt while expanding too rapidly.

By purchasing Majestic, Centennial became the state's second-largest liquor store chain with more than 70 stores.

Gregory Wonsmos, Centennial's president and CEO, in a court filing blamed the bankruptcy reorganization on changes in North Texas dry laws that opened up competition from supermarkets. And this was followed by the entry of big-box liquor stores, Wonsmos said, making an apparent reference to Spec's from Houston and Total Wine of Potomac, Md., as well as the expansion of a regional chain, Goody Goody's.

"As a result of this pressure, sales have declined -- and are currently down approximately 50 percent year over year," his filing said.

Some in the industry suggested that Centennial might also have made missteps similar to Majestic, by growing too quickly in a hyper-competitive market on borrowed money.

To avoid bankruptcy, Centennial closed under-performing and unprofitable stores, and sold off its East and West Texas divisions this past summer. Staff was reduced from 650 to 247 to operate the 23 remaining Centennial, Big Daddy's and Majestic stores.

Still, the desperate moves weren't enough to "cure" the company's liquidity crisis, and it fell behind on payments to liquor and wine wholesalers. No beer distributor was cited as a creditor as that part of the industry operates on a cash-on-delivery basis, Albergotti noted.

Glazer's and Republic stopped deliveries to Centennial several months ago, leaving it without fresh inventory for the important holiday season.

The company disclosed in documents filed in support of its bankruptcy petition that it had tried to secure refinancing, sell "potentially" all of its non-real estate assets to competitors along with attempts to sell, then lease back several stores. None of it worked.

Centennial directly owes loans totaling $6 million to BBVA Compass, which are secured by $10 million worth of inventory. A real estate unit of VEI Miller that worked with Centennial as its real estate arm also owes the Spanish bank $11.7 million on eight parcels of property, which are locations of current or former stores, Albergotti said. The real estate is appraised at $16 million.

Large creditors include Doug Miller, the major investor, who is owed nearly $9.5 million; Republic Beverage, $3.4 million; its employee's pension fund, $2.6 million; and Glazer's Wholesale, $1.8 million.

Barry Shlachter, 817-390-7718

Twitter: @bshlachter

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