Judge grudgingly gives Pittsburgh Brewing two more weeks

Judge grudgingly gives Pittsburgh Brewing two more weeks

Wednesday, October 25, 2006 By Len Boselovic, Pittsburgh Post-Gazette

U.S. Bankruptcy Judge M. Bruce McCullough yesterday granted Pittsburgh Brewing a two-week stay of execution, forcefully questioning whether current management or anyone else can raise the capital needed to save the 145-year-old Lawrenceville brewery.

His comments came during a hearing on $814,000 in unpaid federal excise taxes, a debt that's grounds for closing the brewery immediately. Company attorney Robert Lampl and attorneys for creditors pleaded with the skeptical judge not to do that, asking that the brewery be given until Nov. 7 to come up with financing sufficient to put the beleaguered brewery back on its feet.

"If they can't even pay this, why don't we just shut it down?" Judge McCullough asked at the beginning of the 45-minute hearing. "This thing has gone on long enough and it isn't happening. When it's dead, it's dead."

The judge also criticized a reorganization plan the brewery filed last week, saying, "The plan you've got ain't gonna work. ... That plan doesn't fly."

The reorganization plan calls for $500,000 in interim financing from East Liverpool, Ohio, financier Craig Newbold and $7 million in debt and equity from unnamed investors. Observers question whether anyone would provide financing unless current management, including President Joseph R. Piccirilli and minority shareholder Jack P. Cerone, is replaced.

Rumors continue to circulate about outside investors interested in rescuing the brewery, but thus far no one other than Mr. Piccirilli and Mr. Cerone, the son of a convicted Chicago mob boss, has made a proposal.

Pittsburgh Brewing sought bankruptcy protection Dec. 7 after the Pittsburgh Water and Sewer Authority threatened to terminate service over more than $2 million in unpaid bills.

Mr. Lampl said the brewery is scheduled to meet next week to discuss financing with interested investors. He said several alternatives are being considered, including what he called "Plan C," which would not require about $1 million in concessions the brewery is seeking from 160 workers represented by the IUE/Communications Workers of America.

Although Mr. Lampl did not state it, that plan would probably result in producing the brewery's flagship brands, Iron City and IC Light, at another brewery, possibly the former Rolling Rock brewery in Latrobe purchased recently by City Brewing of La Crosse, Wis.

IUE/CWA attorney Michael Healey and Robert Sable, the attorney for the brewer's unsecured creditors, asked Judge McCullough to give the brewery until Nov. 7 to come up with what Mr. Healey described as "a credible plan with credible financing."

"The place does have a chance. We'll know in two or three weeks if it's going to make it," Mr. Healey said.

Judge McCullough questioned that optimism, telling Mr. Sable, "You wear rose-colored glasses like I've never seen." He said delaying a decision on the fate of the brewery will just make it harder when the time comes.

"What you're doing here is putting me closer to Christmas when I've got to put people out [of work]," Judge McCullough said. "I just don't want people to have expectations that this is going to work because I don't see it."

But in the end, the judge agreed to delay a decision until Nov. 7, when he will be asked to approve the brewery's request for $500,000 in interim financing from Mr. Newbold. He also agreed to a compromise over the unpaid federal excise taxes.

The order will allow the U.S. Alcohol & Tobacco Tax & Trade Bureau to cash in $593,000 in brewery bonds that back payment of excise taxes. The brewery also agreed to ship future tax payments and tax returns to the brewery over night.

Once the bonds are redeemed, Pittsburgh Brewing is required by law to purchase a new bond to back up future excise tax obligations. Mr. Lampl said it can't afford to do that. Lawyers for the government agency said they are unwilling to shut down the brewery if it doesn't have a bond and left that decision to Judge McCullough.

"If you can't do a bond and you can't keep current, how do we keep you alive?" Judge McCullough asked.