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Vodka Maker CEDC May Go Bankrupt

One of the world’s largest producers of vodka, the Central European Distributors Corp, has warned that it may file for bankruptcy, while it made a last effort to reduce its debt by $750 million.

The company has recently been experiencing turmoil in ranks with shareholders battling for a takeover, and its chief executive resigning, while at the same time problems were revealed with its financial reporting.

The company, which has headquarters in Warsaw, Poland and Mount Laurel, New Jersey, is defending at least two shareholder class actions and other lawsuits in the U.S.

The company, which is facing a huge liquidity crisis, has offered to exchange $257.9 million in notes payable on March 15 with 10 percent of the company’s stock. It has also asked for a new debt arrangement that matures in 2020 against 65 percent of its stock and adjustment with about $957 million senior secured notes due in 2016.

The bond exchange proposed may be difficult to close as it requires both 98 percent of the notes maturing in March and 95 percent of the notes maturing in 2016. CEDC shareholders are unlikely to give their approval to the exchange, and they have proposed alternate plans in response.

The voting deadline for the plan proposed by the company is March 22.

There are other creditors with Roust Trading Ltd, which is owned by the company’s Chairman, holding a secured debt of $50 million.

Another major player, Mark Kaufman, who is the second-biggest stock holder after the company’s Chairman, has proposed an investment of $75 million to pay off this year’s notes at market prices.

As a backup plan, the company has also asked holders of its notes to approve a Chapter 11 bankruptcy if the company failed in its bid to exchange the bonds.

Scott: