Friday, February 7, 2020

Oshkosh arena lawyers say financial reorganization is coming together even as short-term losses mount

The Menominee Nation Arena is described as being in a "ramp-up" phase as it moves toward financial stability
By Miles Maguire
Although losses continue to mount at the Menominee Nation Arena, lawyers for its owner say they are optimistic about the prospects for exiting bankruptcy.

At a court hearing last month, attorney Jerome R. Kerkman said the owner, Fox Valley Pro Basketball Inc., has received a “term sheet for some exit financing” related to tax incentives from the city. A term sheet is a nonbinding document that outlines the key points of an investment agreement.

Additional financing is also being negotiated, Kerkman said, although he declined to go into details at the hearing.

He said he has “a fair amount of confidence” that Fox Valley will be able to submit a plan of reorganization by the end of the month.

New financing would be central to the plan because it would allow the developer to reduce its debt and lower the sky-high interest rates it has been charged.

The arena’s losses in December came to almost $314,000, compared to $287,000 in November. Its net worth continued to drop, to a negative $5.8 million at the end of last year.

“This was a company that was fairly far, I would say, underwater on many fronts,” Kerkman said. “I’m not that surprised that it’s taking us some time to stabilize the debtor’s business operations.”

He said the arena is currently in a “ramp-up” phase that involves “a lot of working capital expended.”

The goal is “booking events, having events and then getting revenue,” he said. There is necessarily a lag between paying to schedule performers and then receiving income from ticket and related sales, he said.

“There are losses,” the lawyer said. But “we’re not concerned with those. From a business plan side, the debtor continues to get to where it wants to get.”

With a big gain in food and beverage sales, the arena’s December income rose to $259,000, from $148,000 in November. But performer payouts jumped from $10,000 to more than $113,000 during the month, helping to push the cost of goods sold to $314,000, compared to $168,000 the previous month.

Kerkman noted that Fox Valley was able to pay the first installment of its property taxes on time this year. The $113,128 payment keeps the developer eligible to receive a rebate later this year from the city.

The rebates that the city has agreed to send to Fox Valley, known as tax increment financing or TIF, have always been part of the developer’s business plan. Fox Valley hopes to sell the promise of future payments at a discount to an investor that can provide an immediate infusion of cash.

The developer has now lined up a third financing broker, Nauth Advisory Group, to help it raise capital.  

Nauth was founded by Geoff Nauth, who has worked in commercial real estate for M&I Bank, Bank One Wisconsin, LaSalle National Bank and Northwestern Mutual.

"Geoff Nauth has experience with TIFs, in obtaining financing based on that," said Evan P. Schmit, an attorney for Fox Valley.

According to court papers, Nauth recently helped secure TIF financing for The Rock, a sports complex in Franklin.

Meanwhile the state has filed another tax warrant against Greg Pierce, the president and principal owner of Fox Valley. This time the Department of Workforce Development says that Pierce owes $8,529 for unpaid unemployment coverage.

The agency said it could not provide additional details because unemployment insurance records are confidential under state and federal law.

Schmit said the state's claim is based on debts incurred before the company went into bankruptcy and cannot be settled while the court process is ongoing. The money is expected to be paid as soon as Fox Valley's financial reorganization plan is approved, he said.

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