Russian River Vineyards, which sought protection in U.S. Bankruptcy Court last year while it attempted to reorganize its finances, is now fighting efforts to liquidate the Forestville winery and restaurant.
A federal trustee wants to convert the bankruptcy from Chapter 11, which has allowed the company to continue operating while it develops a repayment plan, to Chapter 7, which would force it to sell its assets and shut down.
A hearing in the Santa Rosa court, originally scheduled for Friday, was postponed for a week at the company's request.
"We are working very hard to make this work," said managing partner Chris O'Neill. "We have, I believe, really turned things around. When we took this place over a few years ago ... the place was a mess, quite frankly. And we have brought this place back."
Excluding mortgages, Russian River Vineyards owed about $200,000 to $300,000 to creditors when it filed for protection last year. Since then, its debts have grown and the trustee in the case, August B. Landis, filed a request in May to convert the case. In a court filing, Landis said the winery racked up significant losses since its original bankruptcy filing, and that it was unlikely to restructure successfully.
The company amassed substantial overdraft fees for insufficient funds: 64 instances in April, 89 in May and 36 in June, according to court documents.
O'Neill concedes the company has cash flow issues, especially during the slow season. But Exchange Bank covered the checks, and reversed half of the overdraft charges, he said.
"Every check we have written has been honored," O'Neill said. He intends to repay dozens of creditors in entirety, and said business picks up substantially during the summer tourism season.
Company revenues are growing. In 2011 the company reported $1.1 million in revenue, and it expects $1.5 to $1.6 million this year. In its push to survive, the company has engaged in barter and trades to reinvent itself, installing a clay pizza oven for the restaurant and planting its own garden to reduce produce costs. O'Neill even obtained certification to host a farmer's market at the winery.
Even so, the debts are mounting. In late April, it had incurred $97,400 in new debt since its bankruptcy filing, and two months later the figure had grown to nearly $147,000.
O'Neill still owes tens of thousands to small businesses around town, and some are doubtful they'll ever be repaid.
One of the largest unsecured creditors is Sunrise Farms in Petaluma, owed about $27,000 last year. The egg company, which owns a 20-acre vineyard, sold Russian River Vineyards chardonnay grapes in 2008.
"They took the crop one year, and they couldn't pay for it, and that was it," said partner Arnie Riebli.
Russian River Vineyards employs about 30 people, and all would lose their jobs if the company liquidated. O'Neill plans to meet with the trustee next week to address alleged inaccuracies and inconsistencies in the company's operations reports.
"If they stand a chance of making it, I would be their strongest advocate," Riebli said.
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