Brothers Beer will avoid liquidation after shareholders agreed to inject more than $1 million into the business to keep it afloat and some creditors agreed to wear losses.

The pub and restaurant side has been reduced from seven venues to just two in order to keep the production side of the business running, including the closure of the original City Works Depot site.

The final administrators report, released this week by PwC’s Stephen White and John Fisk, said the best outcome was for Brothers Beer to continue trading “in a business-as-usual manner, albeit on a scaled down basis”.

Brothers Beer Ltd (BBL) and Brothers Wholesale Ltd (BWL) — which operated several pubs, a brewery and wholesale distribution business — entered voluntary administration in early August, along with the ultimate shareholding entity, Brothers Beer Holdings Ltd (BBHL).

The administrators report said: “Non-performing hospitality sites located at City Works Depot, Commercial Bay, Onehunga and Birkenhead were closed with immediate effect. The staff at these locations were redeployed where possible, but some redundancies were required.

The administrators have kept two locations trading, the main Mount Eden brewpub, and the Piha pub/restaurant.

The assets at the Birkenhead site were sold to a new tenant of the landlord. The assets at the Orakei site are subject to a sale and purchase agreement, and the assets at the Onehunga site remain where they are with the agreement of the landlord.

All other assets that were surplus to requirement were relocated to a central location pending a public auction and tender process. At the date of the report, the auction has ended, but the tender process relating to certain specialised brewing equipment, remains active.

“Accordingly, we await the details of the final outcomes from these sale processes. The management team and directors of the Group are continuing to attend to the sale of remaining assets, and the Deed Administrators continue to oversee and monitor this process.”

The Brothers Group owed creditors a combined $5m.

The report said the expansion into numerous venues proved costly during the Covid-19 pandemic and then, with pubs able to reopen, inflationary conditions “put further pressure on the bars and the distribution business”.

Before going into administration, Brothers had tried to sell the venues but the administrators noted there wasn’t enough interest.

“The challenges within the business were mainly in respect of the hospitality part of the business,” PwC’s Stephen White told NBR. He added that the core part of the business, which was the wholesale/retail distribution division, was considered to be the most viable going into the future.

A Deed of Company Arrangement — a binding agreement between shareholders and creditors of a company that sets out how it would continue to operate — was put together and executed in September, following a meeting of creditors.

White told NBR that BBHL’s shareholders agreed to inject $1.09m into the business, and some creditors have agreed to take a haircut for how much they were owed. So far, shareholders had advanced $376,000 to BBHL. “The debts on appointment will certainly not be paid in full,” he said. He said various categories of creditor had agreed to compromise, depending on where they sat.
For instance, trade creditors who were owed less than $1000 would be paid in full over time and Inland Revenue would get 40 cents on the dollar.

“The outcome for creditors under the Deed of Company Arrangement is going to be a much better outcome than they would have got under a liquidation scenario,” he said.

White and Fisk’s roles have changed from administrators to deed administrators, and they would continue in this position for about 18 months.

Brothers Beer was started in 2012 by friends Anthony Browne and Andrew Larsen and, in 2015, the company established a new brewery and taproom in Mt Eden.

The BWL wholesale distribution company was incorporated in 2016.

The ultimate holding company was established in 2018 and lists Anthony Browne and Shane Bradley as its largest shareholders, with 38% and 19% stakes respectively. Browne was the sole director of BBL and BWL, and was also on the board of BBHL along with Christopher Brown.