Vijay Mallya's Legal Proceedings In India Now Troubling His US Beer Firm
US-based Mendocino Brewing banking on $1 million bridge loan from UBHL United Breweries Holding is holding firm of Vijay Mallya-led UB Group In March quarter, Mendocino suffered a net loss of $637,100
New York/London: Legal proceedings in India against beleaguered businessman Vijay Mallya have now come to haunt his US-based brewery firm, which is banking on a $1-million bridge loan promised by his holding firm for survival.
"Vijay Mallya, the company's Chairman and indirect majority shareholder, is presently subject to certain legal proceedings in India, which may impair the company's ability to obtain financing from UBHL (United Breweries Holding Ltd) and other potential funding sources," California-based Mendocino Brewing Company Inc said in a regulatory filing.
This is probably the first admission by the US-listed firm, which is struggling for funds and has been served default notices by lenders in the past, about the potential impact of Mr Mallya's legal woes in India on its own fortune.
If it fails to secure funds, Mendocino said, the lenders may take "recourse against the applicable pledged collateral which includes the company's real and personal property in the US and the UK".
In its latest quarterly filing with the US market regulator (SEC), Mendocino said, "The board of directors of UBHL during this quarter has approved debt financing to the company in the form of $1,000,000 of bridge loans."
"If UBHL does not consummate such debt financing, it would have a material adverse effect on the company's financial condition and the company's ability to continue to operate."
The company disclosed that its total assets declined to $16 million as of March 31, 2016 - lower than its total liabilities worth more than $18 million.
In the quarter ended March 31, it recorded total sales of about $6.9 million, but suffered a net loss of $637,100.
Mr Mallya got a pay package of over Rs 1.7 crore in 2015 from this US-based company, more than half of which was paid by Mendocino to him for "promoting" the company's beer brands. He serves as chairman of the board of directors of the company, which has an exclusive licence to brew and distribute Kingfisher Premium Lager in various countries. (Read: Mallya takes Rs 1.7 crore pay package from his US brewery)
Besides, it produces and sells a number of craft beer brands.
United Breweries Holdings Ltd (UBHL), the holding firm of Mr Mallya-led UB Group, is the "indirect majority shareholder" of Mendocino Brewing Company (MBC).
Mendocino's North American operations primarily consist of brewing and marketing proprietary craft beers. Its foreign operations are conducted through wholly-owned subsidiary United Breweries International UK Ltd (UBIK) and a step-down unit Kingfisher Beer Europe Ltd.
The two largest shareholders of Mendocino are United Breweries America (UBA) and Inversiones, both of which are controlled by Rigby International Corp, a company registered in the British Virgin Island.
Rigby, in turn, is a wholly-owned subsidiary of UBHL.
Mr Mallya, who is at the centre of a major controversy for huge loan defaults by his group in India, controls over 68 per cent shareholding held in Mendocino through UBHL.
Mr Mallya's business empire once included companies across liquor, fertilizers and airline businesses. His financial troubles began to mount after erstwhile Kingfisher Airlines had to be grounded under big losses and huge debt.
While lenders in India are seeking to recover total dues worth over Rs 9,000 crore from him, Mr Mallya recently signed a lucrative exit deal with Diageo, to whom he had earlier sold a majority stake in United Spirits, and said he intended to spend more time in England.
