A relatively young craft brewer from Anaheim — Brewery X — is poised to take over ownership of San Diego’s Modern Times after submitting the winning bid of $20 million during an auction Friday that attracted three would-be buyers.
The sale of Modern Times, which fell into receivership in March after accumulating considerable debt, is expected to become final following a court hearing Monday in Orange County.
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The overseers of the auction characterized the bidding process as “robust,” with 70 individual bids made over more than three hours.
“The bidding started at $7.62 million, so to get to $20 million, we consider that an exceptional result for Modern Times,” said Paul Buie of Onyx Asset Advisors, which helped run the sale for the court-appointed receiver.
Brewery X, which is described on its website as a “patchwork of professional brewers, and beer lovers,” declined to comment on the auction’s outcome, saying it would be prepared to say more after Monday’s court hearing.
Since opening in 2019, Brewery X has produced more than 250 flavors and styles of beer and seltzer, many of which are sold in more than 500 store locations in California and Aspen, Colo., according to a news release last year announcing that Brewery X beer would be sold at various concessions at the Ontario International Airport.
“The final bid was wonderful, and it is a testament to the work of the Modern Times Beer employees and the work they have done over the past months in a very constrained business — and, of course, the work they’ve done to create the Modern Times Beer brand over the past years,” said Modern Times Chief Executive Jennifer Briggs in a statement released late Friday. “I am looking forward to working with the company confirmed on Monday to make a successful transition.”
Brewery X easily bested the minimum bid requirement of $7,620,000. Among the bidders was Hawaii’s Maui Brewing, which had been chosen by the receiver, Thomas Hebrank, as the stalking horse bidder. An additional break-up fee of between $200,000 and $225,000 that will be paid to the Kihei-based brewer will be decided in court, Buie said.
Under the terms of the court-authorized sale process, the new owner will not be responsible for any existing debt.
Over the past four years, Modern Times had undertaken an aggressive expansion effort, adding brewpubs in Portland, Oakland, Santa Barbara and Los Angeles, a move that left the brewery with a heavy debt load. In addition to a slow rebound at its tasting rooms and restaurants from a crippling pandemic, Modern Times was also having to grapple with rising gas prices, trucking constraints and aluminum can shortages.
Briggs made the decision in February to close those locations, resulting in the loss of about 70 jobs. Remaining were about 160 workers at its production facility and brewpub in Point Loma, as well as its locations in North Park, Encinitas and Anaheim.
The restructuring, though, wasn’t enough to stave off court action by Zions Bancorp, the parent of Modern Times’ senior lender, California Bank & Trust. In March, it filed a receivership action in Orange County Superior Court after the brewery had fallen behind on loans.
Senior secured debt with lenders totals about $16 million, according to Briggs. In addition to California Bank, there are outstanding loans with a second bank and the U.S. Small Business Administration’s Economic Injury Disaster Loan program.
“With the amount of the final bid, the senior secured lenders will likely be pleased with the outcome,” Buie said Friday.
Briggs took over as CEO of Modern Times in January from founder and former CEO Jacob McKean, who stepped down in May 2021 amid #MeToo like allegations on social media of toxic working conditions.
Modern Times had been 30 percent employee-owned with an Employee Stock Ownership Program, or ESOP. In a receivership, though, employee owners are classified as regular equity shareholders, according to Briggs. Because of that, they will be at the back of the line behind secured and secondary lenders, unpaid vendors and others in terms of a payout from a sale.
Sales proceeds will be held by the receiver until the court approves a motion governing distribution to creditors.