Culmination Brewing Closing after SMBX bondholders send them to collections
Culmination Brewing is closing, the northeast Portland brewery’s last day is February 15th, 2025. Culmination Brewing founder Tomas Sluiter initially announced the closure back in August 2023 saying the company was circling the drain and majority shareholders were forcing him out of his CEO role. Soon after the owners brought in media personality Steven Shomler who launched a campaign to save the 8 year-old brewery he deemed “iconic” launching a social media campaign with hashtag #abreweryworthsaving. Culmination Brewing persisted for 18 months since the initial warning that it would shut down imminently, that in itself may be a win for those employed by the business but not for the 252 investors, some of whom contacted the New School feeling like they had been conned. In December, after 10 months without any dividends paid to bondholders, the investing platform SMBX sent Culmination Brewing to collections.
Small breweries have utilized crowdfunding services like Kickstarter and indiegogo since inception to make their startup dreams come true. With banks and loan officers less interested in risky microbrew business loans, small loan investment platforms like SMBX have made raising tens of thousands of dollars by crowdsourcing to beer fans a plausible expansion option that has worked out for a lot of people.
In early 2021 Culmination Brewing successfully raised $400K from 252 small investors who contributed anywhere from $10 to $12,940. The funds were split up to use $350,000 (87.5%) for a new can line, cellar tanks, and equipment installation, and $50,000 (12.5%) for working capital and labor costs. When you are a 5bbl operation as Culmination is the margins of profit on cans are razor slim, and using mobile canning operations eat into that profit.
Of course any loans have a repayment risk, and on Culmination Brewing’s SMBX page the fine print reads:
Our ability to make payments on the bonds depends upon the results of our operations. Culmination Brewing Company intends to honor its debt-servicing obligations. However, our ability to do so depends on our ability to generate sufficient revenue to service our bond interest payments. Failure to generate sufficient revenue could prevent us from making distributions or otherwise providing cash needed in order to make payments on the bonds. Culmination Brewing Company Series A 01-2028 Bonds are secured against collateral however, and will follow the covenants in section Form of Collateral on page 14.
But according to one of the bondholders, the last payment back they received from Culmination Brewing was in February 2024:
“I was twice told by SMBX that bond payments might resume…and they haven’t,” one bondholder told the New School back in September 2024. “When I pressed him [Shomler] as to when he thinks a payment might be made he said not for at least six months. Tons of excuses for not being able to make payments - someone had embezzled money from the brewery, lack of accounts from a bad distributorship, etc. He even told me that his son passed away (yes, I’m sympathetic, but what am I supposed to say?). He also reminded me that I made an investment that has risk. If he could just say they don’t have the cash flow I would be more accepting.”
At the time SMBX stepped in to intermediate with an update to bondholders in June that said:
We were able to speak with the team at CLMN on Friday, 6/7, as scheduled. They are still in operation and plan to make at least one make-up payment between now and early July, and expect to resume regular payments by August at the latest. We will be working with them to collect the other outstanding balance once their regular payments have resumed.
That never happened.
In a video posted on August 9th, 2024, Culmination’s Steven Shomler announced “We are finally turning the corner, and we are transitioning from a brewery worth saving to a brewery on the rise,” and went on to promote that he had turned the company around and it was now on a path to success.
This only inflamed tensions with the bondholders who have felt strung along and ignored. Instead of working with bondholders Culmination Brewing’s Steven Shomler seemed to be waging a self-promotional campaign where he credited and thanked himself in his own posts via their official accounts using the hashtag #abreweryworthsaving.
“No mention of the investors in the community,” says one investor referring to the YouTube video titled “A Brewery Worth Saving - The Final Episode.”
“I think for him [Shomler] it’s a low priority, if not at all, to pay back the bonds. No restructure of the bond terms, no partial payments, nothing. The bonds are secured by the canning equipment but I doubt that they would sell it to satisfy some of the funds owed to investors. Another problem is that the prospectus states that the brewery will share its financials with investors (through the SEC website) every year but that has not happened, so there’s no info on how they re doing (or where any money is going). “
On December 10th, 2024 Culmination Brewing posted to their social media channels.
It’s been well over a year and because of Steven’s grit and determination we are still alive and kicking. We are very grateful for Steven efforts and the leadership & vision he has provided for the 16 months. Sadly Steven’s time at the helm has come to an end.
3 days later on December 13th, 2024 the federally regulated SMBX loaning platform announced they were sending Culmination Brewing (CLMN) to collections.
“As you know, CLMN has stopped making Bond payments. Culmination Brewing’s management has been inconsistently responsive to SMBX’s requests for a plan to bring their account current. CLMN’s management also suggested multiple times that partial payments would be resumed imminently, which was never followed through with. Consequently, SMBX has placed their account with a third-party collections agency in an attempt to recover funds.
As the Bond Prospectus notes, SMBX acts solely as the intermediary between the Bond-issuing business and the investor. The Bonds are not obligations of SMBX. Whenever possible, we prefer to work directly with delinquent Issuers to try to bring them current to protect SMBX investors but in this case have determined that collections is the best course of action.
We will keep you apprised of any further developments. If our collections partner is successful in recovering additional funds, we will release those payments to you as they become available.
We appreciate your understanding and value you as an SMBX investor.”
January 30th was reportedly the last day for some members of Culmination Brewing as they wind up operations to likely close sometime in February. It is a sad ignominious end to the Oregon Beer Awards Best New Brewery of 2015 but saddest of all is that some of the brewery’s biggest supporters that put them on the map to begin with and pulled them out of the pandemic, will likely be left high and dry.
Culmination Brewing team celebrates medal wins at the 2020 Oregon Beer Awards
Culmination Brewing Company’s SEC filed Bond Prospectus is explicit in their obligations to bondholders seeking repayment:
Series A 01-2028 Bonds are partially secured by collateral (75% or $300,000 secured) in the form of the new canning equipment that will be purchased using the proceeds from this offering. The remaining 25% of the total target amount to be raised (about $100,000) will be unsecured. The canning equipment that the company intends to purchase is valued at $314,000 which will cover the 75% collateral for the bonds. Based on the amortization schedule of principal and interests owed for these 7-year bonds, it will take Culmination Brewing 2 full years to pay down a total of $100,000 which is the amount that is unsecured. Investors should understand that if a default happens within the first 2 years of the bonds’ existence, that only up to DocuSign Envelope ID: DB705FD7-C779-4931-94AE-D2D5D7AF4287 15 75% of the total amount remaining on the bonds owed will be covered by collateral. Under the covenants of this indenture, in the event there is a default on any of the bond payments due that exceeds 30 days of their payment date, Culmination Brewing Company will be contractually obligated to convert/sell some or all of its newly purchased canning equipment at the best market price available at that point in time and use the proceeds to pay back bondholders to the best of their ability. Any debt not covered by the proceeds recovered as part of the collateral being sold, and where Culmination Brewing Company are unable to cure their debt obligations on these bonds within 90 days from the initial written notice by the intermediary, may warrant further actions by the intermediary on behalf of bondholders, which may include instituting judicial proceedings, or referring out to a third-party collection agency, in an order that the intermediary determines is in the best interests of bondholders. As highlighted, Culmination Brewing Company Series A 01-2028 Bonds are senior bonds and may be fully senior to interests held by creditors holding subordinated debt, or other beneficial owners with legal claim to liabilities in the event that we enter into a receivership, insolvency, liquidation or similar legal proceedings.
“I could take my case to small claims court but even with a judgement in my favor I doubt I’d collect,” laments one bondholder. “If Culmination closes no point to me filing a suit. Would still make an interesting piece about how, despite making great beers they are failing/have failed and a lot of small investors are taking a loss.”
UPDATE: Culmination Brewing’s in-house sub-leased kitchen FOMO Chicken has stated that Culmination Brewing owes them almost $20k.