By Miles Maguire
The developer of the Menominee Nation Arena has lived to fight another day in its bankruptcy case as it has secured the OK to move ahead with $500,000 in temporary financing.
But two major hurdles remain: finding a way to monetize a promised string of city incentive payments and booking acts that will turn a profit for the facility.
“We are very pleased with the efforts of all parties involved to work toward resolving Fox Valley Pro Basketball’s financial issues,” said Jerome R. Kerkman, a lawyer for the developer and owner of the arena, in a press announcement issued Wednesday evening.
Earlier in the day Kerkman had outlined in a bankruptcy court hearing how his client hopes to move forward with a goal of clearing the decks by the middle of January.
Aside from legal bills, which Kerkman said would be substantial, the arena should be close to breaking even in January and February.
Up until now, he said, the cash-strapped arena did not have enough money to book artists who could draw big crowds and generate profits. “We just didn’t have the cash that artists require to make a deposit,” Kerkman said. “That is going to change,” he said.
Kerkman told the court how Fox Valley had worked to satisfy the concerns of creditors, especially the largest one, Bayland Buildings Inc., which is owed more than $13 million. A key step will be providing payments to Bayland based on certain leases and sponsorship agreements for advertising at the arena over the next few months.
“Both sides have agreed to stand down and try to get to a plan” of financial reorganization, Kerkman said. Wednesday’s agreement is “basically to give us breathing space with an opportunity to get to a plan.”
As the debtor in a Chaper 11 case, Fox Valley has the exclusive right to propose a reorganization plan for 120 days, which would run to mid-December. Kerkman said the parties have agreed to extend this period to the middle of January because of the end-of-year holidays.
One factor that seems to be motivating the creditors is the recognition that the project could go into liquidation, which would be handled under Chapter 7 of the bankruptcy code. Some creditors have had to rethink their positions because “parties are concerned if this case tanks into a 7,” Kerkman said. “If this goes into a 7, the sponsorships may dry up, and there may not be any funds.”
A big question mark is how much money that developer can raise by selling off the future stream of city payments promised under a tax increment financing (TIF) agreement. The goal is to raise $4 million to $5 million.
Those funds would serve as “seed money for payments on the effective date of the plan,” Kerkman said. Expanded bookings would then provide revenue “to fund any kind of payment stream under the plan.”
The city had resisted making the initial installment of TIF funds but decided in late September to release most of the money, close to $400,000, so that the arena can continue to operate.
Fox Valley says it is close to hiring a broker who specializes in securitizing TIF payments, which involves selling off the future payments at a discount in exchange for an immediate lump sum of cash.
The ability of the broker to find a willing investor to pay enough cash is critical to the reorganization plan, which Kerkman said could be in place by early next year.
“The only thing that will sort of change that is really whether we need more money with the TIF,” he said.
City Manager Mark Rohloff said he had no comment on the court agreement but added there has been no discussion about increasing the amount of money in the tax incentive agreement.