In 2007, Jim DeBonis set out to save three storied Sonoma County wineries.
Geyser Peak, Buena Vista Carneros and Gary Farrell were being sold to the world's largest wine company, Constellation Brands, and he feared for their future.
So DeBonis, chief operating officer of the company unloading the wineries, Beam Wine Estates, set out to buy them back from Constellation and return them to local ownership.
He would succeed in June 2008 after several nerve-racking months of negotiations. In a complex $209 million deal, DeBonis formed Ascentia Wine Estates and acquired eight wine brands in California and the Northwest from Constellation.
After years of watching local wineries get snapped up by huge companies based in London, New York and Chicago, the deal was a source of pride for many in Sonoma County and proof that its signature industry still had some control over its own destiny.
"It was a great story. Local brands, local ownership and competent management," said Mario Zepponi, a Santa Rosa-based wine industry broker and investment banker.
It was also an exhilarating highlight in the long career of a respected wine industry veteran and Sonoma County native.
"Making this whole thing come together is really a dream come true," DeBonis said at the time.
Two years later, DeBonis' young company is fighting for survival.
Its partnership with one of its key investors, W.J. Deutsch & Sons, which also marketed its wines, has collapsed. Deutsch responded by filing a lawsuit claiming Ascentia is insolvent.
DeBonis has dismissed the lawsuit as "phony," and denied the company is failing, suggesting W.J. Deutsch is responsible for its anemic sales. He said the Healdsburg company is executing a plan to build its own sales and marketing division and work directly with distributors.
"We have complete confidence in our growth strategy, which we are already executing," DeBonis said in a statement last week. He declined multiple requests for an interview.
But industry watchers say Ascentia faces an uphill battle as it seeks to put the W.J. Deutsch debacle behind it and recover its footing in a fiercely competitive wine market.
"It's a madhouse," veteran industry consultant Jon Fredrikson said of the current wine climate. "It's a jungle and it's survival of the fittest, and whenever you dress up a company with a lot of debt, it's a risky proposition."
After more than a year of mounting evidence that the recession is taking a financial toll on the North Coast's fine-wine industry, the challenges at Ascentia are emerging as the clearest example yet of the precarious position some local wineries find themselves in.
While predictions about Ascentia's fate vary, there is a growing consensus among industry watchers that something has got to give if the company is to survive. Ascentia's debt in particular is being cited by several industry observers as something that must be restructured.
Precise details of that debt were not available, but nearly all of the $209 million acquisition involved varying forms of debt, including tens of millions of dollars in private equity investments arranged by San Francisco-based GESD Capital.
Ascentia's massive lease payments for its wineries and vineyards is the single biggest obligation from the 2008 deal that will have to be renegotiated, several observers said.
VinREIT, a St. Helena-based investment group, spent $110million to buy four wine production facilities and 646acres of vineyards in the deal, leasing everything back to Ascentia. The wine company's total annual payments to VinREIT amount to $10 million, according to Deutsch's lawsuit.
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