The Riverhounds Event Center, L.P. and Riverhounds Acquisition Group, L.P., the limited partnerships that own and operate Highmark Stadium and the Pittsburgh Riverhounds Professional Soccer Club respectively, jointly declared voluntary Chapter 11 bankruptcy on March 26, 2014. Debtors filed in the United States Bankruptcy Court for the Western District of Pennsylvania, assigned case numbers 2:14-bk-21180 and 2:14-bk-21181 respectively. Both cases have been assigned to the Honorable Jeffery A. Deller.
The Riverhounds Event Center, L.P. owns and operates the newly constructed Highmark Stadium located in the South Side area of Pittsburgh and claims assets ranging from $1 million to $10 million with liabilities between $10 million and $50 million. Of those liabilities, $7.2 million is mortgage debt and $1.5 million in bank loans.
The Riverhounds Acquisition Group, L.P. is the limited partnership that owns the Pittsburgh Riverhounds minor league soccer team and claims assets ranging from $500,000 to $1 million with liabilities between $1 million and $10 million. The Pittsburgh Riverhounds was founded in 1999 and currently plays in the United Soccer Leagues. Much of the debt leading up to the bankruptcy was incurred in 2012-2013 during the construction of Highmark Stadium. The bankruptcy is not expected to affect the 2014 season.
Debtors share some creditors such as Shallenberger Construction, Inc., First National Bank of Pennsylvania, and Urban Redevelopment Association of Pittsburgh. Both debtors are represented by John M. Steiner of Leech Tishman Fuscaldo & Lampl, LLC.
Settlers Ridge No. 3, L.P. files for Chapter 11
By Katie Imler, Law Clerk
On May 13, 2013, StonePepper’s Grill, formally known as Settlers Ridge No. 3, L.P., of 1738 North Highland Road, Pittsburgh, PA 15241 filed a voluntary Chapter 11 bankruptcy petition in the Bankruptcy Court for the Western District of Pennsylvania, assigned Case No. 13-22082-CMB. The case has been assigned to the Honorable Judge Carlota M. Bohm.
StonePepper’s Grill is a restaurant that serves brick-oven pizza and won the 2012 Best Burger in Upper St. Clair Contest. The restaurant chain has three (3) locations in Upper Saint Clair, Mars, and Robinson Township. The only location effected by this filing is the Robinson Township location. Counsel for the Debtor is Robert O. Lampl, located at 960 Penn Avenue, Pittsburgh, PA 15222. Lampl’s disclosed hourly rate is $400/hour.
A summary of the docket for the case can be viewed here.
The Debtor has elected to be considered a “small business debtor, ” defined under Bankruptcy Code § 101(51D)(A) as a person engaged in commercial or business activities who as of the date of petition filing or order of relief has an aggregate non-contingent liquidated secured and unsecured debts in an amount not more than $2,000,000.00 (excluding debts owed to 1 or more affiliates or insiders). See also Bankruptcy Code § 1116. The bankruptcy filing showed liabilities and assets between $100,000.00 -$500,000.00. The Debtor listed the largest unsecured debts as $93,940.00 in Employer Withholding, $78,775.00 in Loans to owner Jeff Joyce, $77,535.00 in PA Sales Tax, and $38,465.00 in Business Debt to CRK Management LLC, who also employs Jeff Joyce. It also has a Business Debt of $77,613.00 payable to Settlers Ridge Leased, LP.
A hearing will take place on June 25, 2013 in regards to confirmation of employing Debtor’s counsel. The Chapter 11 Small Business Plan and Disclosure Statement are due November 12, 2013.
Let’s face it, all businesses face challenges. Especially when the economy is not a booming bull, financial challenges are in abundance. You are not alone. So what do you do when your company has financial troubles staring you down? What do you do when going to work every day puts you and your family deeper in debt instead of adding money to your bank account? At some point, the best business decision you can make may be the decision to no longer do business.
What do you do? Well, there are a few options: 1) Sell the business to a competitor, strategic business, or key employee; 2) File for Chapter 7 bankruptcy; 3) Wind-down the company yourself. We want to talk about the latter two options. Before taking action, both avenues have advantages and disadvantages that must be weighed.
Avenue 7. Filing for Chapter 7 Bankruptcy means that a Bankruptcy Trustee employed by Office of the United States Trustee of the Department of Justice, steps into the shoes of the company and has the burden of winding-down the business. In doing so, the Trustee is in control of distributing the business assets according to the Bankruptcy Code.
Perks of Chapter 7:
- Upon filing a petition for Chapter 7, an automatic stay is imposed preventing lawsuits and writs of execution against business assets –think of it as MC Hammer’s “Can’t Touch This.” This preserves the vital business assets and provides peace of mind that the business will not have to defend against future legal actions arising from pre-petition debts
- The Bankruptcy Court assumes the burden of notifying all creditors of the bankruptcy (sending the “funeral notice”, if you will). Having this objective third party serve as a buffer between the business owner and the unpaid creditor provides a sense of relief to the business owner
- Debtor benefits from expertise of an experienced Bankruptcy Trustee
- Debt forgiveness is not taxable
Downsides of Chapter 7:
- Business management has no control in the winding-down
- Trustee will scrutinize the pre-petition financial and operational affairs of the Debtor
- Instead of finding a strategic buyer who may pay more for business assets, a trustee may liquidate business assets for pennies on the dollar, called a “fire sale”
- Trustee may abandon certain assets letting creditors with an interest in them duke it out
- Since the Trustee assumes the place of the debtor, he or she also assumes all of the debtor’s legal claims. The debtor, therefore, may be without standing to pursue a future lawsuit arising out of pre-petition transactions, unless otherwise agreed
- Furthermore, filing for bankruptcy creates a public record and may pick up media attention, depending upon your business
- Time and monetary costs are also associated with Chapter 7. In addition to attorney’s fees, the filing fee alone is $306 and the Debtor will have to pay Trustee’s fees if there are assets for the Trustee to liquidate. Plus, the Trustee’s fees come off the top of liquidation proceeds before any distributions to creditors are made.
The Wind-Down Alternative. If you are a do-it-yourself personality, then the Wind-down approach may be the approach for you. In this scenario, you control the winding-down process of the company and pay off the debts. However, this do-it-yourself project may require a thick skin and much cooperation from your creditors and lessors.
Perks of Non-Bankruptcy Wind-down:
- Winding-Down the business yourself avoids the legal and bankruptcy fees
- Business owner retains control and does not expose dirty laundry to the public
- Business avoids scrutiny by the Trustee
- Higher likelihood that you, the business owner with the industry know-how, will find a better buyer in the market who is willing to pay more for business assets
Downsides of Non-Bankruptcy Wind-down:
- Creditors may initiate an involuntary Chapter 7 bankruptcy petition against your business
- Business must comply with state laws for dissolving which are usually more demanding than the Bankruptcy Code and take longer to execute. If liquidation is done incorrectly, the business can be exposed to lawsuits for dishonoring creditors’ legal rights
- Business owner personally deals with all of the creditors and is responsible for all issues that arise.
- Debt forgiveness is taxable outside of bankruptcy
Now, do you file for Chapter 7 or Wind-down? In some cases, a hybrid approach may be best. Go as far as feasible in the liquidation process on your own, and then turn it over to a Trustee or a bankruptcy lawyer to finish the job. Weigh which option suits your needs the most, reflecting upon your unique business, the nature and amount of the debt that your business still owes, and your personal capabilities. And, as always, it is best to first consult with your attorney.
MAZURKRAEMER represents debtors and creditors in bankruptcy courts all over the country. The information, comments and links posted on this blog do not constitute legal advice. No attorney-client relationship has been or will be formed by any communication(s) to, from or with the blog and/or the blogger. For legal advice, contact an attorney at MAZURKRAEMER or an attorney actively practicing in your jurisdiction.