Listed spirits distiller Top Shelf International (ASX: TSI) has struck an agreement to sell its Campbellfield production facility for $8 million, with the proceeds being used by the embattled company to pay down debt – including an outstanding excise liability owed to the Australian Taxation Office.

The sale to Idyll Wine Co (IDL) has been accompanied with a co-packing arrangement with IDL which will allow the Melbourne-based company to produce its branded products, led by Ned Australian Whiskey, on site following the completion of the sale.

Under the agreement, which comprises all plant and equipment at Campbellfield, Top Shelf also has agreed to sell some of its excess bulk whisky inventory to IDL.

“Proceeds received from the sale of the operational and production assets and the excess bulk whisky will be applied towards transaction costs and reducing the company’s debts, including the reduction of the company’s outstanding ATO excise liability,” says the company.

The ATO had previously taken recovery action against the company for an outstanding excise debt of $4.7 million.

The move is the latest asset sale by the company which last year offloaded its Eden Lassie agave farm in the Whitsundays to an entity related to non-executive director Stephen Grove in a lease-back deal worth $5 million.

Top Shelf is producing its tequila-like agave spirit, known as Act of Treason, from the farm’s harvest.

The company reported an unaudited bottom-line loss of $21.17 million in FY24, down from a $48.29 million loss a year earlier.

Underlying EBITDA of a $10.14 million loss was an improvement on the $20.15 million loss a year earlier, despite a 3.3 per cent fall in revenue to $26.64 million.

Shares in Top Shelf have been suspended since 27 September when the company said it was unable to produce audited results due to continuing negotiations with its senior lender and its largest creditors.

“The company continues to progress discussions with a number of parties regarding the provision of funding and potential transactions to address its short- to medium-term operating needs and the repayment of outstanding creditors,” Top Shelf said at the time.

A quarterly update released by the company in November revealed that Top Shelf was still exploring a number of potential transactions “to address its operating needs and repayment of creditors”.

The company reported an underlying EBITDA loss of $2.6 million in the first quarter of FY25, which was a 14 per cent improvement compared with a year earlier thanks to higher gross margins. Redundancy costs hit the bottom line during the quarter.

“Despite continued difficult trading conditions, particularly in the on-premise channel, there have been positive momentum in some key areas,” the company said in its update.

Top Shelf reported that Endeavour Group (ASX: EDV) sales volumes grew 36 per cent from a year earlier.

In the June quarter of last year, Top Shelf completed an $11.7 million equity raise and extended its debt facility’s maturity by 12 months to December 2025.

The debt facility at the end of June was drawn to a total of $22.2 million with cash reserves of $1.2 million at 30 September 2024. The company made a debt principal repayment of $2.8 million in July 2024.

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