12.03.2010  
 

British Columbia Winery Group Is Foreclosed

Holman Lang properties will be auctioned to satisfy creditors

 
by Peter Mitham
 
Holman Lang
 
Penticton, B.C.'s scenic Holman Lang Vineyards is in receivership, and among other properties, will be auctioned in January.
Penticton, British Columbia—An ambitious venture that had set its sights on becoming the largest group of estate wineries in British Columbia is now in receivership. On. Nov. 24, the B.C. Supreme Court appointed Wolrige Mahon Ltd., Vancouver, as receiver manager for operations and assets of Penticton’s Keith and Lynn Holman, Holman Farms and five other companies including Holman Lang Wineries Ltd. and Lang Vineyards Ltd. A tender package for potential purchasers of the group’s assets was released this week. (Documents regarding the receivership are available here.)

“Every single property that the Holmans own related to wine is being foreclosed or has been foreclosed,” Michael Cheevers, Wolrige Mahon president, told Wines & Vines. “They don’t have many friends out there at the moment.”

Receivership came at the request of BMO Bank of Montreal, the group’s chief financier and one of 11 secured creditors. Court filings indicate that BMO is owed $15.1 million (all amounts in Canadian dollars). An additional $1.75 million is owed to a diverse group of 77 unsecured creditors, ranging from the packaging company Universal Specialties Inc. (owed $263,477) to vine supplier Guillaume Plants de Vigne (owed $205,722) and a host of consultants, industry associations and others. (The smallest debt listed in filings is $15.68 outstanding to Penticton Wine Lab Inc.).

The group’s debts total just short of $16.9 million; its assets are valued at $22.7 million, including approximately $20 million in property and $1.3 million in inventory. The tender package Wolrige Mahon prepared earlier this week lists 53,691 bottles of wine at seven properties including the Naramata wineries 5,000-case Lang Vineyards, Zero Balance Vineyards (200 cases), Soaring Eagle Estate Winery (5,000 cases), Stonehill Estate Winery (1,000 cases), Mistral Estate Winery (2,000 case) and Spiller Estate Winery  (500 cases) as well as 500-case K Mountain Vineyards in Keremeos, in the neighboring Similkameen Valley.

Assets also include the quaint four-room Spiller’s Corner Bed and Breakfast adjacent to the tasting room of Spiller Estate (a fruit winery), and the assets of Spirit West, a fledgling distillery.

Just seven properties comprising 105 acres are actively for sale at this point, although the tender package indicates it may entertain offers on all assets. Three wineries—Lang Vineyards, Soaring Eagle and Stonehill Estate—are among the active offerings.

Bulk wines excluded
HolmanLang
 
As recently as October, owners Lynn and Keith Holman were optimistic about their situation.
Cheevers said bulk wine is excluded from the assets being sold, including bulk wines being made from grapes harvested this year. Cheevers expects this wine will find a market given the difficult 2010 harvest, which left some wineries short. “There is a demand for bulk wine, because the harvest was not good this year,” he said, but noted that sales will aim to fetch the best price possible for bulk wine that usually sells at a discount.

Current winemaking staff are overseeing the production, Cheevers explained.“I don’t have a bunch of accountants up there trying to do it,” he said.

The receivership is the culmination of a difficult year for the Holman wineries. Senior winemaker, Bernhard Schirrmeister left the group in March, and Vancouver wine consultant James Cluer is reported to have been contracted by BMO to market 95,970 liters of bulk wine at between $3 and $7 per liter. (Cluer, who is listed as being owed $70,000 personally and $36,500 through his consulting company Fine Vintage Ltd., could not be reached for confirmation.)

The troubles are a dramatic shift for a dynamic group that was emblematic of the Okanagan’s transition from orchards to vineyards. Keith and Lynn Holman initially launched Spiller Estate in 2003, a natural diversification to their orchards.

Grape wineries followed, with Lang Vineyards, Stonehill Estate (formerly Benchland Vineyards) and other properties added to the portfolio. A distillery producing fruit spirits for export was also planned. “What we’re trying to do is be diversified as much as we can,” Holman said during a 2005 interview, noting that orchardists were hard-pressed by low fruit prices.

But rapid expansion funded in part by land sales ran into tough times, and in spring 2009 several properties were put on the market as part of refinancing arrangements. Sotheby’s International Realty Canada took the listings as part of the launch of a new division showcasing vineyards and vineyard-oriented properties. Mistral Estate, on 16.5 acres, was listed at $5.5 million while Stonehill, on nine acres, was listed at $3.9 million. Vineyards started at $170,000 per acre. The properties attracted interest from as far away as China and Russia but no sales occurred.

Still, during a chance meeting in a Penticton coffee shop in October, Holman was sanguine. While the past two years had been difficult financially, he was pleased with the harvest. He and his wife were sitting with their accountant and looking forward to a meeting the next day with the bank. Just five weeks later, the bank called its loan and a receiver was in place.

“It sounds like they’ve been struggling for awhile, but even when something like that happens you still sit back and say, ‘Wow,’” said Mike Raffan, vice-chair of the B.C. Wine Institute and the owner of 100-case Township 7 Vineyards & Winery, which neighbors Spiller Estate. “It’s certainly going against the grain right now what’s happening to them.”

Raffan said sales of B.C. wines have been healthy—particularly those marketed under the Vintners’ Quality Alliance banner, which requires that wines be made from 100% B.C. grapes. Sales of VQA-branded B.C. table wines sold through government stores are up between 12.1% and 16% during the quarter ended Sept. 30, 2010 vs. a year earlier.

“There are people that are going to get burned, and that is sad. But given all of the economic turmoil that’s gone on in the world, the industry’s in good shape,” Raffan said.

Wolrige Mahon has set a deadline of Jan. 28, 2011, for final offers on the assets, and will accept or reject offers by Feb. 9, 2011. Sales will close five days later.
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