|The arena's debts come to $28.8 million, but the facility has started to earn more cash, according to court papers.|
By Miles Maguire
The owner of the Menominee Nation Arena has proposed a way to get out of bankruptcy, but its plan would provide little in the way of immediate cash relief for its creditors.
In a court filing late Friday, Fox Valley Pro Basketball Inc. said it hoped to net at least $4.3 million from a private lender in Minneapolis called Dougherty Funding LLC. But much of this money, $1.5 million, would be reserved for working capital, leaving just $2.8 million available for creditors in the short term.
The claims against the arena owner are almost $29 million.
The plan “provides for the only way to pay creditors anything on account of their claims,” said Jerome R. Kerkman, a bankruptcy lawyer working for Fox Valley Pro Basketball. The arena owner is proposing “the plan because its management believes it is in the best interests of all parties,” Kerkman said.
The working capital in the plan has been described as a critical part of running the arena since it is needed to book performers, who in turn drive ticket and refreshment sales.
Creditors will have an opportunity to vote on the plan, and “the debtor requests that creditors vote in favor of the plan,” Kerkman said.
If the proposal is rejected by creditors, one alternative would be a cramdown, the plan notes. In a cramdown the bankruptcy court restructures debts and forces creditors to go along.
City Manager Mark Rohloff said Saturday he had not yet seen the plan.
The arena’s largest single creditor, Bayland Buildings Inc., would receive no immediate payment under the proposal but would instead continue as a mortgage holder for up to 30 years. Bayland, the general contractor on the project, is owed $13.2 million and would receive $65,000 a month under the proposed plan, according to court documents.
Bayland asked the Winnebago County Circuit Court to appoint a receiver to take control of the arena in August. This action prompted Fox Valley to seek bankruptcy protection, which it said would be better for all creditors.
Bayland officials were not immediately available for comment.
The arena opened in late 2017 and serves as the home of the Wisconsin Herd, which is the minor-league affiliate of the Milwaukee Bucks and is owned by an entity called Future Bucks LLC. The arena owner owes Future Bucks about $570,000, which would be paid upon the effective date of the plan if it is approved, according to court documents.
Unsecured creditors that are owed a total of $13.5 million would be asked to divvy up $500,000 as a downpayment on what they are owed, which works out to less than 4 cents on the dollar.
They would then be offered a promissory note paying a 3% interest rate for 20% of the outstanding balance owed them. The rest of their debt would be converted into stock with a payout equal to 75% of any profits that are generated until the balances are paid.
The plan calls for canceling $10 million in common stock. The investors who hold that stock would then be issued a new class of stock that would pay out 10% of any profits, according to court documents.
Certain creditors, who are identified as trade creditors, would receive 100% satisfaction on their debt, totaling about $850,000. Trade creditors are those that have been supplying goods and services without a written instrument documenting a loan.
The city and the arena’s bankruptcy lawyers would also receive 100% of the amount owed to them.
The new cash that would come into the deal from Dougherty Funding would be paid in exchange for a promise to receive future payments from the city under a tax incremental financing agreement. These payments, worth a face value of $5.2 million, will amount to about $10 million once interest is factored in.
In addition to winning the acceptance of creditors, the plan hinges on the financial success of the arena, which is trying to expand its activities beyond sports and to sponsor more musical concerts and other events.
According to court papers, the arena is on its way this year to making $2.1 million on operations, a figure that does not take into account payments that would be due under the plan.
Next year profit before plan payments is projected at $3.6 million.
The payments under the plan are shown as $1.1 million on an annual basis.