Iconic bourbon, vodka brands spared from Chapter 7 liquidation

When a company files for Chapter 7 bankruptcy, that usually means a total liquidation.

In some cases, it does not mean the end of the brand, but whoever buys the company's intellectual property has great leeway over what to do with the brand. Retailer Sharper Image, for example, used to run modern retail stores selling high-tech gadgets, massage chairs, and other futuristic devices.

After its liquidation through a Chapter 11 bankruptcy, the brand's name was purchased, and retail items, mostly games, aimed at going on a business person's desk or in their office. The new owner leveraged the cache of the old brand on merchandise that didn't really meet the former brand standard.

In theory, you could buy a premium clothing brand in Chapter 7 bankruptcy and use it on cheap, mass merchandise clothes. The bankruptcy court will generally sell assets to whatever entity will bring the best return for creditors, not the best potential steward of the brand.

For many brands, however, a Chapter 7 bankruptcy filing means a death sentence. It's often a full liquidation where the brand simply goes away.

In the case of Stoli USA, the company had been granted court approval to move its Chapter 11 bankruptcy to a Chapter 7 filing, but a court has stepped in and stopped the company from being liquidated.

New development in Stoli USA bankruptcy

"A Texas bankruptcy judge has ordered the appointment of Chapter 11 trustees to take over the Kentucky Owl/Stoli bankruptcies rather than dumping everything immediately into liquidation. The move came after lender Fifth Third Bank objected to motions filed last month by Kentucky Owl parent Stoli Group (USA) and by the unsecured creditors to convert the reorganizational Chapter 11 bankruptcy to Chapter 7 liquidation," Kentucky.com reported.

That happened after a deal was reached between various stakeholders.

"Stoli Group’s bankrupt US arm and bourbon affiliate Kentucky Owl LLC reached an agreement to appoint at least one Chapter 11 trustee to help wind down the businesses after its largest senior lender — Fifth Third Bank NA — opposed converting the case to a Chapter 7 liquidation," Bloomberg Law reported.

Stoli, Fifth Third, and a committee of unsecured creditors are working to finalize whether there will be one trustee handling both companies or two overseeing separate liquidations, the parties said during a Monday (Feb. 2) status conference in the US Bankruptcy Court for the Northern District of Texas.

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• 35-year-old consumer company files Chapter 11 bankruptcy

The arrangement will still lead to a liquidation

The settlement filed Wednesday (Feb. 4) is 'unorthodox' but not impermissible, Judge Scott W. Everett said during a Thursday hearing in the US Bankruptcy Court for the Northern District of Texas, Bloomberg Law reported.

“This is a package deal that greases the skids for an orderly transition to a Chapter 11 liquidation and gives the future trustees substantial benefits, albeit with some hand tying,” Everett said.

Stoli USA Bankruptcy history:

• Stoli USA entered Chapter 11 bankruptcy, citing mounting debt, declining U.S. vodka sales, and pressure from its main secured lender, reported TheStreet.
  A court‑appointed receiver took control of Stoli USA, putting the company’s assets and operations under oversight as lenders seek repayment, a different TheStreet article shared.
• The bankruptcy puts the future of the Stolichnaya vodka brand in the U.S. at risk, including distribution rights, trademarks, and ongoing operations, according to Reuters.
  Stoli’s troubles reflect broader pressure on legacy spirits brands, as consumers cut back on alcohol spending and shift toward newer premium or nonalcoholic options, the Wall Street Journal reported.
  After more than a year of restructuring efforts, negotiations with its senior lender failed to produce a feasible reorganization plan that would allow emergence from Chapter 11, according to a press release.
• On January 14-15, 2026, the companies filed motions to convert their Chapter 11 cases to Chapter 7 bankruptcy (liquidation), and the Official Committee of Unsecured Creditors joined with its own conversion motion, EvenFlo reported.
• A judge has ordered Chapter 11 trustees to take over Kentucky Owl/Stoli’s bankruptcies instead of immediate liquidation, meaning liquidation won’t start right away under Chapter 7, according to Kentucky.com.

What does this mean for Stoli USA?

Stoli, which used to be called Stolichnaya, was made in the United States under license from its parent brand. The U.S. bankruptcy will not impact the global brand, but the Stoli name is not an asset owned by the U.S. company, while the Kentucky Owl brand is.

A new company could, in theory, license the Stoli name while the Kentucky Owl brand could be sold as part of the Chapter 11 liquidation.

A Chapter 11 receivership works differently than a Chapter 7 liquidation.

Chapter 11 Liquidation (Under a Trustee/Receivership)

"Although the central purpose of Chapter 11 is to facilitate reorganizations rather than liquidations (covered generally by Chapter 7), Chapter 11 expressly contemplates liquidations," Congress.gov shared.

• Process: The debtor remains in Chapter 11, but the court appoints a trustee or receiver to take control of operations and manage the sale of assets. The case is technically still a reorganization, but liquidation is chosen as the best way to maximize creditor recovery.
• Control: The trustee/receiver controls the business, evaluates asset sales, negotiates with creditors, and ensures a structured wind-down under court supervision.
• Flexibility: Chapter 11 allows the trustee to sell assets free and clear of liens, negotiate contracts, and potentially continue some business operations temporarily, all under court oversight.
• Goal: Maximize creditor recovery while maintaining more control over asset sales, sometimes preserving more value than a straight Chapter 7 sale.
  Sources: Cornell Law, Bloomberg Law

"When a Chapter 11 trustee is appointed, the trustee replaces the debtor’s management and assumes control of the debtor’s business and assets to administer the estate for the benefit of creditors. Appointment of a trustee is rare and occurs only for cause or if it is in the interests of creditors and the estate," according to the U.S. bankruptcy code.

Daniel Kline has been covering retail and business bankruptcies for over 30 years.

Related: 159-year-old whiskey brand on the brink of Chapter 7 liquidation