Pabst Brewing Company’s term loan has moved into distressed territory as the company faces pressure to monetize valuable real estate in Southern California before debt payments resume next year.

The beer group, best known for its Pabst Blue Ribbon lager that enjoyed a brief resurgence in the early 2000s, could face challenges making the payments given the current condition of the business, said a sector banker and an adviser. Lenders potentially could push for a debt-for-equity swap or an asset sale, the adviser added.

In January, Pabst reached a deal with lenders to cut in half cash interest payments and suspend annual USD 18m amortization payments until either it sells land it owns in Irwindale, California, or September 2027, according to ratings agencies.

S&P Ratings warned that it expects the company will generate negative free operating cash flow through 2028, leaving Pabst short on cash to cover even its now reduced interest expense unless business booms or it sells the property.

Domestic beer sales have been declining as older generations reduce their alcohol consumption, while younger consumers opt for flavored hard seltzers and other convenient ready-to-drink alcoholic options, as reported.

In a further hit to sales, Canada has been boycotting US alcohol brands in response to the Trump administration and sales to the country are unlikely to revive even if an ongoing trade dispute is resolved, said a second sector adviser.

Pabst produces dated sub-premium-priced beer while its competitors are upselling domestic beer brands, the first sector banker and another sector adviser said. Additionally, Pabst relies on third-party brewers to make its beer, which results in additional costs in a fragmented marketplace, the banker said.

Pabst still enjoys significant assets, though, thanks to its California property.

As it looks to unlock value, Pabst has been working with Yellow Iron Real Estate to develop the industrial land at 15801 First Street, Irwindale into two separate areas, according to Yellow Iron. It has proposed building 3 million square feet of industrial and 12,000 square feet of commercial space.

The proposal is currently under a 45-day public review period that ends 12 September and then will go before the city’s planning commission, according to a representative for the city.

Back in 2023, Pabst reached a deal with the REIT Rexford Industrial to sell a brewing facility on the site for USD 120m in a sale-lease-back deal and hold onto the remaining 150-acre undeveloped industrial property next to the brewery.

Rexford provided a USD 125m 7.5% loan due October 2028 to Pabst, secured against the undeveloped land at a 60% loan-to-value, and has a right of first offer for the site, according to an SEC filing. S&P has estimated that Pabst could net proceeds of USD 200m from the sale of the property after covering the mortgage.

The deal came two years after Pabst agreed to lease the brewery to its then-contract brewer City Brewing on a long-term lease, an agreement that was amended following the Rexford deal.

Pabst has subsequently been working to move away from using City Brewing to produce its products but has told rating agencies that increased efficiencies from its new producer, AB InBev, have yet to be realized even as reliability improves.

City Brewing has been facing its own financial distress as customers like Boston Beer Company cut production. The company’s owners handed the keys to its lenders last year, but its new first-out term loan issued as part of the deal has been quoted at 0/1 by a broker, according to Markit.

Pabst’s USD 368m SOFR+ 600bps term loan due 2028 was last quoted 51/55, according to Markit. A USD 100m SOFR+ 800bps super priority first out term loan issued in early 2025 was quoted by one broker at 93/95.

Eugene Kashper, through Blue Ribbon Partners, acquired Pabst with TSG Consumer Partners in 2014. The financial sponsor later exited the investment, leaving Blue Ribbon Partners with full control.

Representatives for Pabst and Yellow Iron didn’t respond to requests for comment.