Republic National Distributing Company (RNDC), formerly the second-largest wine and spirits distributor in the United States, has filed for bankruptcy after a yearlong shakedown. The distributor voluntarily filed for chapter 11 yesterday in the Southern District of Texas to initiate a court-facilitated process of shuttering the residual portions of its business, according to a memorandum published by the company.
“The court-supervised process is intended to give us the time and flexibility to continue working with parties that have expressed an interest in acquiring our other markets and conduct an orderly wind down of our remaining operations,” the memo reads.
The filing says RNDC has over 100,000 creditors, assets between $500 million and $1 billion, and liabilities between $1 billion and $10 billion, according to Wine & Spirits Daily, who reviewed the document.
RNDC’s filing lists the 30 most substantial unsecured claims against the company, which total over $300 million. The largest unsecured claim is a sum of $93.92 million owed to Proximo Spirits, producer of brands like Jose Cuervo, for trade debt and litigation. According to Brewbound, there is also an undetermined contract claim owed to Reyes Holdings — parent company to Reyes Beverage Group, which bought 11 of RNDC’s markets — and $62.4 million owed to Empower Annuity Insurance of America, a financial services provider and retirement plan recordkeeping company.
The bankruptcy does not encompass National Distributing Company, which merged with Republic Distributing in 2007, according to the announcement. What remains of National Distributing Company, based in Atlanta, is unclear, as minimal information about the company exists. It also does not loop in RNDC’s joint ventures in Illinois, Indiana, Kentucky, Michigan, Ohio, and New York. The joint venture in Alaska is the only one included in the chapter 11.
The filing comes after RNDC shed the majority of its markets in recent months. The former middle-tier powerhouse withdrew from California last June, a move that preceded a firesale of its nationwide markets to competitors like Reyes Beverage Group, Columbia Distributing, Martignetti Companies, and BreakThru Beverage Group. RNDC claims it preserved over 5,000 jobs in doing so.
“Over the last several months, we have taken deliberate steps to transition our operations across certain markets,” the release says. “Ultimately, RNDC’s financial position required us to pursue an in-court process.”
Under a chapter 11 bankruptcy, RNDC remains in ownership of its operations. The company must now file a plan for reorganization to the court that outlines how it will hand off the remainder of its business.
VP Pro Take
“Since I first broke the news here at VinePair last June that RNDC was withdrawing from California, the question of bankruptcy has hung thick in the air in my conversations with current and former workers, suppliers, and other industry observers. There was always a bit of an “if or when” dynamic there — after all, the privately held company’s books are closed to the prying eyes of industry analysts and journalists, so from the outside looking in, one couldn’t rule out the chance that the mega-wholesaler might be able to avoid Chapter 11. But, ah, now one can.
The collapse of a company of RNDC’s size, in an industry as scale-oriented as wine and spirits distribution, in a regulatory regime as favorable to middlemen as the United States’ three-tier system, is a mystery that will have to be solved once the dust settles. We don’t have nearly enough of the pieces so far, and today’s bankruptcy filings will not be the final word. (If you work or worked at RNDC and have tips to share about its collapse, please email [email protected] or text dinfontay.11 securely on Signal. Anonymity available.) But it is obvious even at this point that RNDC’s rank-and-file workers and small suppliers are barely going to get a word in edgewise.
The reason is simple: There’s just not that much money left in the banana stand, and all the biggest players have already gotten what they can out of the flaming wreckage. “I think it’s a real issue for suppliers,” says Kevin McGee, a longtime beverage-alcohol attorney in California who has been following the RNDC meltdown since its exit from that state. “Not to belabor the obvious, but they checked a box on their filing document that said that they believe there will be money to be distributed to unsecured creditors, and they’d have to crest like half a billion dollars to get there… I’m just not sure that’s going to happen.” While larger suppliers may be able demand payment up front from RNDC before filling new purchase orders, smaller firms lack the leverage to do so, as they’re stuck with RNDC as their only route to the market. Many of those with a chunk of the $400 million worth of “unsecured claims” listed in the filing are at risk of being dragged under by the distributor as it sinks.
And what of the ~1,450 workers still employed at the doomed distributor? One of RNDC’s “first day motions” was permission to “pay prepetition wages, salaries, other compensation, and reimbursable expenses and continue employee benefits programs in the ordinary course.” McGee is optimistic that reflects a real commitment to making payroll. After all, as the company itself pointed out, “The workforce possesses unique skills and experience, including familiarity and close relationships with [RNDC’s] expansive network of suppliers and customers… absent payment of the Compensation and Benefits owed to their employees, [RNDC] may experience employee turnover and instability at this critical time.” In other words, if we don’t keep paying our workers, they’ll jump ship. Which is probably true, but you gotta figure everybody is already looking for a spot in a lifeboat, regardless.” —Dave Infante, VinePair columnist and contributing editor
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