Gundlach Bundschu Winery, one of California’s oldest wine producers, has filed for Chapter 11 bankruptcy protection with about $39 million (£29 million) in debt.
The sixth-generation family business, founded in San Francisco in 1858, will remain open while it seeks an outside investor and restructures its finances. The process is expected to result in the Bundschu family giving up majority ownership.
The bankruptcy is the latest setback for California’s wine industry, which has been hit by falling consumption, reduced tourism and weaker demand at wineries across the state.
Jeff Bundschu, the company’s chief executive, said the filing was unprecedented in the family’s long history.
“The company has endured more than a century-and-a-half of historic challenges and transformational change; however, this Chapter 11 filing is unprecedented for our family and our company,” he wrote in court documents.
“We enter this process with great humility and remorse for the burden the company’s financial distress places on our employees, vendors, lenders, customers and community.”
Debt followed expansion before the pandemic
Court filings identify the purchase of a 60-acre estate in Glen Ellen in February 2020 as the immediate cause of the winery’s financial crisis. The property was acquired for Abbot’s Passage, a separate wine brand founded by family member Katie Bundschu.
The deal was completed just before Covid restrictions severely disrupted the company’s tasting-room and hospitality operations. “The growth required to support that investment did not materialize,” the filing states. “The industry’s subsequent contraction magnified those challenges.”
Abbot’s Passage closed its winery and tasting room earlier this year. Katie Bundschu said at the time that the family intended to return to its roots and concentrate on Gundlach Bundschu.
Over the past 18 months, the business has made several rounds of redundancies, reducing its workforce from 102 people to 63. The family has also sold substantial property holdings outside the company and put the proceeds into the winery.
Gundlach Bundschu owes about $20 million to agricultural asset manager Tiverton under a loan carrying an interest rate of 14.75 per cent. A further £17 million is owed to agricultural lender American AgCredit, while roughly 120 vendors and service providers are owed a combined $1.7 million in unsecured debt.
The family tried to secure a buyer or new investment and received three offers that management considered viable. However, lenders rejected them because they were well below the value of the secured debt, according to the court filings.
Winery to continue trading during restructuring
The company said a prospective investor and operating partner had been identified, although no name has been disclosed. The Chapter 11 process is intended to keep the business operating while a court-supervised solution is pursued.
Mr Bundschu said the bankruptcy followed years of operational restructuring, cost-cutting, asset sales, family contributions and negotiations with lenders, but that the efforts had not produced an agreement outside court.
“This is about creating a fair, court-supervised process that gives this historic business an opportunity to survive, preserve jobs, protect relationships with customers and vendors, and ensure the winery remains a meaningful part of the Sonoma Valley community,” he said.
Gundlach Bundschu currently owns about 100 acres, produces approximately 42,000 cases of wine a year and receives around 30,000 visitors. At its peak, annual visitor numbers exceeded 75,000.
The winery has survived Prohibition, the 1906 San Francisco earthquake, wildfires, a vine-destroying pest and the Covid pandemic. The earthquake and subsequent fire destroyed the original winery, three family homes and one million gallons of wine, prompting the family to move operations to its Sonoma Valley estate, Rhinefarm.
In the 1870s, the business became the first California winery to switch to native rootstock resistant to phylloxera. It was forced to close during Prohibition before being revived in the early 1970s.
The family’s century-old home was destroyed in the 2017 wildfires. It was later rebuilt and used as collateral for the winery’s debt.
