Here’s How Anchor Brewing Co.’s Liquidation Could Go Down

Tucked into the overnight press release by which Sapporo USA (SUSA) earlier this month announced the imminent liquidation of San Francisco’s Anchor Brewing Co. was a term that sent your humble Hop Take columnist scrambling for Google. Amid the dross about the various challenges purportedly dragging Anchor under — challenges that its own workers told me were exacerbated by SUSA’s mismanagement during a brief six-year stint at the helm — was a sentence indicating that as “an alternative to filing for Court-monitored federal Chapter 7 or 11,” the company would be conducting an “assignment for the benefit of creditors” (ABC) process that would dictate the brewery’s closure.

A quick search-engine query got me up to speed on the basics of the ABC process. A company going out of business finds a third-party “assignee” to take over the business and its assets (usually using a limited liability company formed especially for the purpose), which agrees to serve as a fiduciary duty-bound to creditors intent on clawing back their dough from that firm while it still sort of exists. (More on that in a moment.) Assignees often have finance, management, or consulting backgrounds — knowledge of the failing firm’s industry is a plus — and make money by charging fees on the deal that they ultimately put together to sell the assets.

Of course, the situation at Anchor is anything but basic. You’ve got a cultural treasure sitting on highly lucrative real estate, in possession of a ton of specialized industrial equipment and a trove of intellectual property amassed over a century and a half in business. You’ve got a multinational parent company, a bunch of purported interest from would-be acquirers of varying fitness, and an employee-led group making a Hail Mary bid to buy the brewery itself and reconstitute it as a worker cooperative. And you’ve got a union: How does that factor in?

Spokesman Sam Singer has said SUSA, the assignor, will turn Anchor and its assets over to the as-yet unnamed assignee at “the beginning of August.”

That’s pretty damn soon. John Kirsten, a project manager who specializes in ABCs at Mission Viejo’s Bay Area Receivership Group (BARG), tells Hop Take that “everything gets to be on a really tight timeline once the trigger is pulled.” This is one of the key reasons some companies favor ABCs over a Chapter 7 bankruptcy, says Geoff Berman, a senior managing director emeritus of Development Specialists, Inc., and a former president of the American Bankruptcy Institute. “Speed, efficiency, and ability to liquidate assets faster without having to be tied up in front of a court,” where bankruptcy judges are not fiduciaries to company’s creditors, are all upsides to the ABC process as far as creditors are concerned. Another is the fact that an assignee is retained and incentivized to focus on one ABC process, whereas their counterpart in court, the Chapter 7 trustee, juggles many.

For an assignor like SUSA, whose executives have spent nearly six years trying and failing to steer Anchor to success, the expedience may also simply be a balm to the sting of corporate embarrassment. “In this case, after apparently trying to sell the business and suffering losses for a while, [SUSA] may just be taking the position, ‘We just want to get out of here, give us an exit.’” That would certainly comport with some current Anchor workers’ views that the brewery on Potrero Hill became second fiddle once SUSA acquired its “new toy,” Stone Brewing Co., in June 2022. Both experts tell Hop Take that ABCs also require fewer disclosures than bankruptcy proceedings and tend to bring less publicity, which, again, could be appealing to a firm just looking to put this in the rearview without having to file a bunch of public documents in court.

Last Wednesday night, I broke the news that Anchor employees are scrambling to try to put together a Hail Mary offer to bid on the brewery. In an emailed message to SUSA’s president, Anchor Brewing Union’s (ABU) business manager with the International Longshore and Warehouse Union (ILWU) requested more time from the parent company to give the workers “a fair shot at being able to continue to do [their] jobs.” Singer did not respond to my request for comment, but in a response to The New York Times that credited our reporting, demurred. “[I]t will be in the hands of the liquidator to make that decision and is dependent on what is offered by potential purchasers,” he said.

But that doesn’t mean the interested employees are dead in the water, says Kirsten. Whether or not the assignee has taken on SUSA’s assets, they “can conduct negotiations, and play middleman between the owner and that group that wants to acquire the assets.” Likewise, even once the assignment has been made to that special-purpose LLC — at which point it ceases to be Anchor in a legal sense, says Berman, and becomes a collection of assets organized under whatever that vehicle is named — those employees can still bid on the firm like any other interested party.

For its part, ABU announced on Monday that it has partnered with a law firm and a nonprofit that specializes in employee ownership issues, and is working on a way to accept smaller grassroots contributions, too.

Could a group of workers really be competitive in an open auction for the company formerly known as Anchor? It depends first and foremost on how much money they’re able to scrape together, obviously, and that remains to be seen. But having worked the plant and made the beer, they may have something going for them in the ABC process. Kirsten, at BARG, says that unlike startups that fail with barely any hard assets, businesses like breweries “are typically worth more if they are functioning and are capable of functioning than they are if you start taking them apart.” This could favor an offer from the employees, whose goal is to operate Anchor as a going concern; it could also make their group an attractive partner for third-party investors who’d benefit from having a skilled workforce with specific knowledge of the plant ready to go from day one. “The brand’s not worth a damn if the beer isn’t good,” Kirsten adds.

That’s not to say that Anchor won’t be sold off piecemeal, mind you, or that the employee group won’t be an underdog in an open field of potential buyers. It can be, and they almost certainly will be. If a third-party buyer materializes and wishes to purchase just the intellectual property and recipes to Anchor’s beers, it’s incumbent on the assignee to evaluate the deal on merit. (It’s not clear whether such a scenario could enable would-be buyers to end-around ABU and resurrect the Anchor brand with non-union labor. The union’s business agent with the ILWU, Pedro de Sá, tells Hop Take that “the contract does not bind any successor to it,” adding that this was a “sticking point” in negotiations and a factor in the decision to accept a one-year contract, rather than the standard three-year agreement. “We thought we were going to have another pass at it next year.”)

“Every case is different. Everyone is fact driven,” says Berman, who literally wrote the book on this method. If a buyer puts forth a big cash offer, and the assignee believes it’s the best they can get, and the most important creditors favor it, it won’t matter whether it’s for the entire operation, or just part of it. The assignee, as a fiduciary, can take into account cultural factors like Anchor’s indelible historic and cultural importance to San Francisco and the American brewing industry, but they can’t take a demonstrably worse offer when there’s a better one on the table.

What about a hypothetical gray-area situation where an investor group offers $15 million in cash for Anchor, and the employees muster $10 million, mostly financed? “It’s hard,” says Berman, because “promises to pay are only as good as the promise.”

​​🤯 Hop-ocalypse Now

Recently, we discussed the USPS Shipping Equity Act (H.R. 3721), which would make it legal for the Postal Service to deliver beer in states where it’s legal to do so. A common objection to this common-sense reform (often echoed by distributors that would rather not broaden brewers’ routes to market) is that such a move would result in a rash of underage drinking by “tech-savvy, innovative, rabble-rousing teenagers” bypassing the ID check at their local store. This isn’t really supported by relevant data, but what are you — a nerd?! Anyway, you know who’s not worried about increasing teen access to alcohol? Lawmakers in the seven states since 2021 that have lowered the age at which kids can begin bartending, according to a new report from the progressive Economic Policy Institute. In West Virginia, that age is now 16; Wisconsin is currently considering a bill that would allow 14-year-olds to work behind the stick.

📈 Ups…

A handful of recently launched brewing scholarships have already started producing more qualified, diverse employees for the industry’s workforce… Scan data for the past 52 weeks year-over-year still shows beer volumes down, but the Fourth of July delivered an 8.3 percent bump…

📉 …and downs

Anheuser-Busch InBev is laying off around 380 U.S. employees… Modelo, Constellation Brands’ golden-foiled golden goose, is reportedly having some nasty keg issues… Future former GOP presidential candidate Ron DeSantis is now trying to draft off the Bud Light backlash…

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