Creditor acquires bankrupt Viansa

Viansa, the popular Sonoma Valley winery built by Sam and Vicki Sebastiani, was sold out of bankruptcy Thursday to its largest creditor for $40.5 million.

Laurus Master Fund, an offshore hedge fund, was the only viable bidder for the 160-acre Tuscan-style winery during the auction in a Reno bankruptcy court. The sale is expected to be finalized when the company emerges from bankruptcy later this month.

"In a sense, this was anti-climatic," said David Honig, one of the attorneys representing about 400 unsecured creditors in the case. "The damage was done a long time ago."

The sale to Laurus was not unexpected because the investment firm claimed to be owed more than $55 million, more than many believed the winery was worth.

Laurus provided the financing to 360 Global Wine Co., which purchased the winery in 2005 for $31 million. The untested company, founded by an aspiring investment banker from Connecticut with virtually no experience in the wine industry, quickly faltered.

It hired Jon Sebastiani to run Viansa, only to have him take a leave of absence two months later following his arrest for public intoxication.

360 Global's troubles mounted from there. A joint venture with Kirkland Ranch Winery in Napa collapsed. The company defaulted on many of its loan payments to private investment groups. It delayed payments to grape growers. And the value of the publicly traded company's stock -- which it used to pay for everything from graphic design to media relations -- plummeted.

The company posted a $123 million loss in the first three months of 2006, a reflection of changes in the way it accounted for the massive debt its lenders had the right to convert into stock.

While its goal was to assemble a portfolio of wineries that could benefit from better marketing, the company also made investments outside the wine industry. It owned a granite quarry in Texas and bought a defunct tungsten mine in Nevada.

The board of directors replaced the company's chief executive officer, Jake Shapiro, last year. When the company filed bankruptcy earlier this year, it had $300 in the bank and was three months behind in shipments to its wine club members, said Martin Brill, 360 Global's bankruptcy attorney.

Since then, under new management and the watchful eye of a bankruptcy judge, the company has restarted its wine club shipments and dramatically increased revenues, Brill said.

But hundreds of creditors in line behind Laurus will get just 2 or 3 cents on the dollar, said Honig, whose San Francisco law firm represents the committee of unsecured creditors.

The creditors argued they should be entitled to additional money if Laurus later sells the winery for a profit, but the judge rejected that argument, Honig said.

"Everyone has known from the get-go that this was a very difficult case and the probability of finding anyone to bid on it at all . . . was low," Honig said.

While the payout will be low, it's better than the alterative, Brill said.

Laurus was getting close to having the right to foreclose on the winery, and could have laid off employees and liquidated the remaining assets.

"Then you'd have a situation that the judge described as chaos, so this is better than chaos," Brill said. "It's not a great result, but it's a good result."

That may be difficult to swallow for some of the 400 creditors owed $5 million who will now divide $150,000 among themselves.

"It's very sad. I think it's very sad for everyone involved," said Penny Popken, a freelance writer from Petaluma who wrote the winery's newsletter for more than a decade. She is owed about $3,000.

Tony Correia, a vineyard appraiser from Fresno, said he doesn't expect to see any of the $5,000 he is owed. He said the story behind Viansa's troubles is a tragic one.

"It's an epic tragedy of a failed family, and it's sad because for the most part I think they are very good people," Correia said.

Sam and Vicki Sebastiani sold the winery to their seven children in 2004, but they struggled to manage it as sibling rivalries flared. Leaderless and struggling, the winery became a financial drain, and the family decided in 2005 to sell.

Despite the mismanagement the winery has suffered since being owned by 360 Global, Correia thinks it can recover. The location on a scenic bluff at the entrance to the Sonoma Valley is unmatched and has helped Viansa build one of the largest wine clubs in the industry, he said.

"I think in the right hands, with a competent manager, that operation should be highly profitable," said Correia. "You have an exquisite tourist center there."

The winery includes about 20 acres of vineyards and 90 acres of wetlands, many of which were created by Sam Sebastiani, an avid outdoorsman. Most of the wine was made at a separate facility east of the town of Sonoma.

Popken said she remains convinced the winery can be turned around.

"The winery still holds tremendous potential," she said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com.