A European vodka maker controlled by a Russian businessman is asking a U.S. Bankruptcy Court judge today in White Plains for approval of a billion-dollar restructuring plan.
Roust Corp., whose CEO is based in White Plains, filed for bankruptcy on Dec. 30, claiming assets of $1.37 billion and liabilities of $787 million.
The liquor company wants U.S. Bankruptcy Judge Robert Drain to expedite the proceedings so that the reorganization can conclude this month.
Bankruptcy is an alien concept where Roust operates in Europe, CEO Grant Winterton explained in a declaration to the court, and a lengthy case could impair its viability.
“It is important that Roust exit Chapter 11 as quickly as possible,” he said, so that employees, vendors and credit support providers “remain willing to do business with the company.”
U.S. Trustee William Harrington objected to an expedited approval process and described the plan as an attempt to avoid scrutiny and procedural protections.
“The debtors, in unprecedented fashion, request that this court, in essence, rubber stamp what can more properly be characterized as a pre-petition bankruptcy case,” he said in a pleading.
U.S. Attorney Preet Bharara also asked the court not to approve the plan so quickly. He noted that Roust set a six-day deadline for objecting to the plan, which is insufficient time for the Internal Revenue Service to gather information on the company’s taxes and to file a claim.
Roust is owned by the Russian Standard Group, a private company controlled by Russian businessman Roustam Tariko.
Tariko “was responsible for saving Roust,” according to Winterton’s declaration. The company was in severe financial distress in 2013, when it was known as Central European Distribution Corp., and two executives were replaced for accounting discrepancies. Tariko lost $100 million. But he but ended up owning all of the company when it restructured through bankruptcy court in Delaware three years ago.
Tariko also has interests in banking, insurance and other liquor manufacturing and importing companies.
Roust is one of the world’s largest vodka producers and it is the largest integrated spirit beverages business in central and eastern Europe. Among its vodka brands are Absolwent, Żubrówka, Soplica and Green Mark.
Roust employs about 3,500 people and operates manufacturing facilities in Poland and Russia. It has executive offices at 777 Westchester Ave. in White Plains and Warsaw, Poland.
Most of its revenues are made in Poland and Russia, and it has been successful in Hungary, France, Germany, the U.K., and Israel. It recorded $445.8 million in net sales, for the nine months ending in September, for a 15 percent increase from the year before.
But strong performance has been offset by “macroeconomic conditions,” Winterton told the court. It is over-leveraged with debt and has high borrowing costs. Currency depreciations in Russia, Poland, Kazakhstan and Ukraine have hurt cash flow in U.S. dollars and made debt repayment burdensome.
Illegal alcohol sales and competitors with lower excise taxes have eroded Roust’s share of the vodka market. A ban on Russian products in Ukraine has resulted in a 90 percent decline in business there. And large Russian tax payments are due this month.
The case is a prepackaged reorganization plan that includes two Delaware-based subsidiaries, CEDC Finance Corporation LLC and CEDC Finance Corp. Int.
The company began negotiating months ago with the debt holders. Under the plan, holders of $496.7 million in senior secured notes would recover an estimated 100 percent of the face value of their claims. Holders of $283.8 million in convertible notes would recover an estimated 27 percent of the face value of their claims.
The restructuring would strengthen the company’s capitalization by more than $500 million, deleverage the balance sheet by at least $462 million and result in $55 million in new equity.
The plan, Winterton said, would position Roust for “accelerated revenue and profit growth” in the global alcohol market, take advantage of growth opportunities and position it for an initial public offering in two to three years.
Today’s bankruptcy court hearing will consider several requests, including authorization to accept an agreement Roust negotiated with most of the debt holders, employment of Epiq Bankruptcy Solutions to handle claims and requests to waive several bankruptcy requirements.
Roust is represented by Manhattan law firm Skadden, Arps, Slate, Meagher & Flom.