USA: Pittsburgh Brewing's fate rests with water authority

In the effort to rescue Pittsburgh Brewing from bankruptcy, the Pittsburgh Water and Sewer Authority, which precipitated the beleaguered brewer's bankruptcy filing 16 months ago, is the only major creditor that hasn't accepted terms offered by Pittsburgh Brewing's proposed savior, an investment group led by Connecticut businessman John N. Milne, Pittsburgh Post-Gazette published April 13.

Mr. Milne's lawyers are seeking the assistance of local and state elected officials in trying to get the water and sewer authority to accept considerably less than the agency says it is owed. The request for government assistance echoes previous cries for government aid when Michael Carlow and Joseph Piccirilli, the brewery's largest current shareholder, rescued the local landmark in the 1990s.

Creditors told U.S. Bankruptcy Court Chief Judge M. Bruce McCullough they need another week to negotiate a settlement with the water and sewer authority. The reorganization plan Mr. Milne's group filed in February calls for paying the authority $250,000, less than 10 cents on the dollar based on the authority's $2.7 million claim.

Meanwhile, the brewery is seeking $250,000 in additional financing, saying it doesn't have the money to buy ingredients to make beer.

"This company is not able to produce the beer it could be selling right now," said Pittsburgh Brewing attorney Robert O. Lampl. "We're on COD [cash on delivery] with certain vendors."

The additional financing will be considered at a court hearing Thursday. It would come from Mr. Milne's investors, who already have loaned Pittsburgh Brewing $500,000. They won't provide additional financing unless they are comfortable they can negotiate a reorganization plan supported by all creditors, Mr. Lampl said.

He said talks with government officials center on getting the water and sewer authority to accept less than it is demanding and to change the way it calculates the brewery's bills going forward. Pittsburgh Brewing has long challenged those calculations, but has never sought a final court ruling on the validity of the formula the agency uses. Instead, Mr. Piccirilli has negotiated settlement agreements with the authority, the most recent being a year before the bankruptcy when he agreed to a court-approved settlement requiring the company to pay the agency in full.

When it failed to live up to that agreement, the agency threatened to terminate service in December 2005. Pittsburgh Brewing sought bankruptcy protection, preventing the shut off.

Some believe Mr. Milne's group is trying to make the agency the fall guy by portraying it as the only major creditor standing in the way of the latest rescue of a local landmark. Mr. Lampl doesn't agree with that assessment.

"I don't think they're being the fall guy. It just came to a natural conclusion that they're the last element," he said.

Other creditors have offered to settle for less because they believe Mr. Milne's group is ready to make a major commitment to save the brewery, Mr. Lampl said. "They gave all those concessions because they believe they're for real," he said.

Getting government officials to sign off on new concessions could be problematic, given the brewery's failure to live up to the pre-bankruptcy settlement with the agency and its prior problems with paying federal excise taxes and government loans in a timely fashion.

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