Indian Springs Vineyards of Penn Valley is considering selling some of its property while it wrestles with its creditors in U.S. Bankruptcy Court over who should get $600,000 owed to the business.
Indian Springs filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on June 15, just hours after PremierWest Bank of Medford, Ore., sought to place the vineyards and winery in receivership for allegedly defaulting on over $4 million in business and personal loans.
PremierWest alleged in its original complaint that Indian Springs was in default on two loans worth almost $3.3 million and that general partner Dennis Ball owed the bank more than $760,000. Indian Springs also owes TransAmerica Life Insurance Co. $4,250,000.
Chapter 11 allows a company to continue operating while making arrangements to restructure its debt. Indian Springs has yet to file a reorganization plan, but has spent considerable time in court sparring with its creditors over a variety of issues.
Bankruptcy Judge Christopher M. Klein resolved one of the issues last Friday, when he gave Indian Springs permission to sell an unspecified amount of property.
Ball declined comment Wednesday on how much property he wants to sell and why the action is being taken. But in a declaration filed with the bankruptcy court, Ball said a sale "would be in the best interest of creditors."
Yolanda MacDonald of Abundant Real Estate in Grass Valley, who was retained to market the property, couldn't be reached for comment. The property had not been listed Wednesday in the local Multiple Listing Service.
Documents filed with the court indicate Indian Springs is short of cash to finance its operations, particularly the 2004 growing season. The winery filed an application seeking court permission to use $600,000 due Indian Springs from Wine Asset Management, Inc.
In a declaration filed with the court, Ball said he has reduced expenses and that Indian Springs only current income is from its wine-tasting room in Nevada City, along with wholesale and retail wine sales. In the past, Indian Springs has sold 70 percent of its grape production to other wineries.
"If ISV (Indian Springs Vineyards) does not receive authorization to use cash collateral within a couple of days, it will result in severe consequences to its operations, which would be irreversible," Ball said in the June 25 filing.
"The use of cash collateral is vital and necessary to enable ISV to continue the business pending the formulation and submission of a proposed plan of reorganization."
Attorneys for PremierWest objected to the application, saying they doubted the winery could turn a profit.
"Any chance of reorganization is speculative," the bank attorneys wrote.
The bank cited a "history of significant losses" and alleged Indian Springs had a year-to-date net loss of $154,860 as of March and a balance sheet that showed liabilities exceeding assets by more than $310,000.
PremierBank alleged that Ball has not told the bank where its collateral is and asked the judge to deny use of the cash collateral "pending further information." A hearing on the application is scheduled for July 27. The first meeting of creditors is set for Friday.
Indian Springs was one of the first commercial wineries in western Nevada County and is believed to be the largest, with annual sales of 20,000 cases.