Ballistic Beer avoids liquidation
Ballistic Beer Co, which went into voluntary administration in January, has avoided liquidation as creditors have voted to accept a Deed of Company Arrangement.
Under the DOCA, a consortium of new investors, including Catchment Brewing Company, has invested $850,000 to take a majority share in the business.
Ballistic entered voluntary administration with debts of more than $5 million, including more than $2 million owed to the Australian Tax Office.
A creditors meeting was initially held last week, but was adjourned until today as administrators failed to secure approval for the arrangement, which initially saw the consortium offer an investment of $700,000.
Questions were also raised at that meeting about the identity of the investors and what plans they had to turn the business around.
Under the initial proposal, unsecured creditors were expected to receive a dividend of 7 cents in the dollar. Under the revised proposal, that saw an additional $150,000 offered taking the total to $850,000, the administrator estimated that creditors would receive 10 cents in the dollar.
While the Deed of Company Arrangement was passed, the Australian Tax Office – the largest creditor – notably voted against the arrangement. A majority of creditors in value and number must vote for a DOCA for it to pass. Despite the size of the debt to the ATO, it did not represent the majority of the debts in total.
The Australian Tax Office stood to set an expensive precedent in the event that it voted to accept the Deed, with a large number of breweries currently carrying significant debts for excise deferred during COVID.
Questions around staff stood down
During the meeting, questions were asked about the legality of staff being stood down without pay by the administrators rather than terminated, with the administrators questioned about the staff’s position under the proposed Deed.
Some creditors suggested that standing down staff, as opposed to terminating them, was illegal quoting advice from Fair Work Australia. It was also suggested that by standing down the workers and not terminating them, their redundancy costs were not factored into the DOCA calculations, while their wages were also not factored into the future running costs of the business.
A supplementary report by the administrators noted that Ballistic had reduced its full-time staff by 16 under the administration, reducing the company’s ongoing annual wage bill by $1.25 million, however, it was suggested that these workers’ entitlements were also not reflected in the DOCA calculations.
Brews News understands that the Administrator accepted that the DOCA did not factor in the redundancy costs related to possible the termination of the stood-down staff which could see the dividend paid to creditors under the DOCA being reduced from $0.10 as a result.
Staff terminated through the administration process are priority creditors and will be paid first before unsecured creditors receive a dividend.
Deed of Company Arrangement
Under the company arrangement, the new investors will be paying $850,000 into the businesses. Convertible noteholders – including Mighty Craft and founder David Kitchen – waived debts of $1.2 million, while shareholders waived debts of $145,000 for loans provided to the company.
The DOCA was recommended by the administrators who suggested that it was in the best interests of creditors who they said would receive less if the company went into liquidation. The administrators said that the brewery assets at market value were worth $1 million, though were likely to fetch $400,000 at auction.
To receive the same return as expected under the DOCA, the administrators would need to sell the businesses and recover $2.05 million.
Future of Ballistic
The investment by Catchment continues that company’s quest for growth through consolidation.
Catchment was founded in Brisbane’s West End in 2015 and despite its attractive fitout and central location, struggled for relevance amongst the city’s more highly regarded craft breweries.
In June 2022, Catchment announced it had purchased Fortitude Brewery and its related brands, which followed its acquisition of the lease for Darling & Co in Brisbane’s Paddington.
Several other hotel acquisitions have been rumoured, and the company has been slowly finding a path towards sustainable profitability.
Under the deal, Catchment’s Group CEO Matt Newberry will be taking a seat on the Ballistic board. Newberry joined Catchment in March 2020 just as COVID lockdowns took effect.
Newberry joined Catchment while a director at Broo, the ASX-listed brewery that has since seen several of its own businesses enter liquidation amidst losses totalling more than $20 million. Despite that, Newberry has the confidence of Catchment’s owners, including well-credentialled Brisbane business people that include mining identity Nick Jorss.
Jorss is best known for having snapped up the mothballed Stanmore Coal for $1 and resurrecting the company for a 1700 per cent return for investors.
Jorss told Brews News that Newberry and his team were well-placed to turn the business around.
“We are pleased to have the opportunity to bring these three great Queensland beer brands together and help save the awesome Ballistic Brewery,” he said.
“The hard work starts now but Matt and the team are absolutely up for the task and we believe there is a very strong future for Ballistic in combination with our fantastic Catchment and Fortitude beer brands.”
The brewing company is joined by drinks distributor Coast2Coast and hospitality company Lala, as well as marketing company Unbound. The administrator’s supplemental report said the partners anticipated an additional $200,000 per month in sales will accrue to Ballistic as a result of the partnership.
Ballistic Brewery Saved From Liquidation
Ballistic Beer Co, one of the top craft beer brands in Queensland, has avoided liquidation by a consortium of new investors, including Catchment Brewing and an interstate hospitality group.
Existing shareholders also came to the table to secure the future of the brand. The company is extremely grateful to its staff, who continued to work diligently, and the broader community, for their continued support during what has been a difficult time for Ballistic, and the wider craft brewing industry.
“We are confident that with the capital injections from our partners and strategic input to the plans we have been working on will see Ballistic remain a large, relevant and popular craft beer brand in the Australian Craft beer Industry,” said David Kitchen, Founder of Ballistic.
The Catchment Brewing Co will take a majority share in the business under this arrangement, with Catchment Group CEO Matt Newberry assuming the group CEO role and taking a seat on the Ballistic board. Catchment has a shared independent brewery ethos and views the Ballistic brand and team as a major asset. David Kitchen will remain as a shareholder and Strategic Advisor the Board.
New investors will manage the brand, venue revitalisation and marketing, wholesale and distribution across NSW, ACT & Victoria, adding to Ballistics’ national opportunities.
“In conjunction with the aggressive growth plans of the Catchment, Fortitude and Noisy Minor brands, we believe Ballistic will add value to our portfolio and offer a truly independent QLD craft beer company with a terrific suite of brands and venues moving forward. We will be retaining as many of the Ballistic team and breweries as we can. Our aim is to preserve QLD jobs and keeping the Ballistic brand alive is important for the Ballistic founders and shareholders as well as the QLD & National craft beer industry,” said Catchment CEO Matt Newberry.
Ballistic is thankful for the strong community backing and support for the development and distribution of the Ballistic Beer Co products, which have achieved significant state and national growth over the past five years.
“The combined skills of all parties will ensure the successful management, branding, marketing, logistics, sales and distribution to accelerate a pathway to profitability,” said Ballistic General Manager Lauren Jack.
Ballistic is working hard to retain as many jobs as possible for its staff, and with the support of its suppliers and new investors, looks forward to a bright future in Queensland and throughout Australia. We are confident that with the new firm financial footing and strategic plans that we will be able to fully recommence business and retain its position as one of the leading brands in Queensland.