🕍New Chapter 11 Bankruptcy Filing - Museum of American Jewish History (d/b/a National Museum of American Jewish History)🕍

Museum of American Jewish History (d/b/a National Museum of American Jewish History)

March 1, 2020

The Smithsonian-affiliated non-profit Museum of American Jewish History filed for bankruptcy in Pennsylvania earlier this month due to a shortfall from (i) sales of memberships and tickets to the Museum, (ii) event revenue, (iii) endowment income and (iv) charitable contributions relative to operating expenses. It appears to suffer from a chicken and egg problem: on one hand, it has too much debt and donors are fearful of contributing to a doomed enterprise and yet, on the other hand, it has too much debt and so the enterprise needs donors to NOT be fearful and donate to service said debt. Round and round we go.

The Philadelphia Authority for Industrial Development issued $30.75mm of Revenue Bonds in 2015 to help refinance the construction loan the Museum originally took on upon its location change in 2007 (Series A bonds are held by BNB Bank and Series B bonds are held by approximately 12 individuals). The bonds are secured by … well, basically nothing. There really couldn’t be a more meaningless security interest as the bondholders didn’t exactly get real property rights and there isn’t a whole lot of collateral or receipts, and property intended for exhibition, education or research is expressly carved-out (according to the papers).

Museum performance has been lackluster out of the gait. Per the Museum:

Since opening in 2010, the Museum’s revenues from gate receipts and events have been inconsistent. Accordingly, in 2017, the Museum reduced its operating expenses by eliminating some paid positions and by making other expense reductions. However, following such reduction in operating expenses, the Museum’s revenues have remained at a level which is insufficient to fully fund its expenses and its debt service.

Eesh. Rough. Subsequent restructuring talks with UMB Bank, BNB Bank and, presumably, representatives on behalf of the Series B noteholders proved futile. They’re undersecured and their bonds are basically worthless: it’s really quite that simple. Unfortunately, the Museum requires bankruptcy to drive that point home and attempt to figure out a restructuring of those bonds.

A quick digression admittedly grounded in opinion rather than fact: much like the United States is “over-retailed” per capita, we’re of the opinion that the United States is likewise over-Museumed. There are more than 35,000 museums in the United States. There are more than 100 museums in the city of Philadelphia. There are dozens of Jewish museums in the United States. Philadelphia is a big (and growing) city and it is entitled to a museum. But with other major Museums located nearby in New York and Washington DC, a general increasing secularization of the US population, and a diminishing number of people who, per various studies, identify as Jewish, it seems increasingly tenuous to maintain this large number of institutions. It’s a shame. But it’s a sad reality. Dont @ us.

• Jurisdiction: E.D. of PA (Judge Coleman)

• Capital Structure: $30.75mm (UMB Bank NA)

• Professionals:

  • Legal: Dilworth Paxson LLP (Lawrence McMichael, Peter Hughes, Yonit Caplow)

  • Claims Agent: Donlin Recano (*click on the link above for free docket access)

• Other Parties in Interest:

  • Successor Indenture Trustee: UMB Bank NA

New Chapter 11 Bankruptcy Filing - USA Gymnastics

USA Gymnastics

December 5, 2018

Man this year has been filled with sleaze-based bankruptcy filings: we’re old enough to remember when The Weinstein Company may have taken the prize for filth. Now, this.

Earlier this week, on December 5th, USA Gymnastics (“USAG”) filed for bankruptcy in the Southern District of Indiana. The bankruptcy filing reminds us that in a coverage universe of companies that file for bankruptcy because of (i) various operational reasons (e.g., declining revenues due to supply chain interruptions, poor inventory management, sky high SG&A, etc.) and (ii) balance sheet reasons (e.g., too much debt, interest expense, and covenant compliance obligations), there are good ol’ fashion litigation-induced bankruptcy filings.

USAG is a 501(c)(3) Indianapolis-based not-for-profit with a focus on six athletic disciplines: women’s gymnastis, men’s gymnastics, trampoline and tumbling, rhythmic gymnastics, acrobatic gymnastics, and group gymnastics. Think of it like a platform (no pun intended): the USAG brings coaches, judges and competitors together for education and competitions throughout the United States. Indeed, the USAG sanctions approximately 4k competitions and has more than 200k members.

In 1988, the USAG formed a separate (non-debtor) entity, The National Gymnastics Foundation, to further the Olympic sport of gymnastics. Thereafter, the United States Olympic Committee (“USOC”) and the Fédération Internationale de Gymnastique designated the USAG as the “national governing body for the sport of gymnastics in the United States.” That designation is now at risk. Why? Enter sleaze here…

Per the Company:

As a result of the misconduct of Larry Nassar, a former volunteer physician to USAG, USAG has been named as a defendant in approximately 100 lawsuits brought by survivors of Nassar’s abuse. USAG’s first priority is to ensure that these survivors are treated fairly and respectfully. The survivors’ claims, in the aggregate, may exceed the available resources of USAG. USAG submits that this Court is the best forum in which to implement appropriate procedures to equitably determine the rights to and allocate recoveries to survivors who have asserted claims against USAG. USAG remains committed to its mission of supporting athletes, and will continue to take specific and concrete steps to promote athlete safety and prevent future abuse.

Nassar was a volunteer medical provider who later faced accusations of sexual misconduct; Nassar ultimately pled guilty to sexual assault and other crimes and will spend his life in prison.

USAG has no secured debt and virtually no unsecured debt — other than the contingent liabilities arising out of the aforementioned lawsuits/claims. Hundreds of individuals have asserted claims in various states against USAG. USAG estimates the potential impact of these suits to be between $75-$150mm. On the asset side of the balance sheet, the company has an operating lease, $6.5mm of cash/equivalents/investments and its insurance policies. And that last piece is where the rubber meets the road. Per the Company:

USAG has insurance coverage encompassing numerous policies covering approximately 30 years, which I expect will provide substantial coverage for the amounts asserted in the various lawsuits and claims. Nevertheless, I understand that the applicable insurance proceeds may be insufficient to cover allowed claims of survivors against USAG. For this reason, USAG filed this chapter 11 case to establish an orderly procedure for the allocation of its insurance proceeds.

The company intends to use the “breathing spell” afforded by Bankruptcy Code section 362’s “automatic stay” (read: an injunction, basically) to (i) establish a process by which insurance proceeds may be doled out to claimants and (ii) assure the USOC and athletes that the USAG is positioned to be the national governing body for gymnastics going forward.

Our two cents? They should definitely consider a rebranding exercise.

• Jurisdiction: S.D. of Indiana (Judge Moberly)

• Capital Structure: $mm debt     

• Company Professionals:

  • Legal: Jenner & Block (Melissa Root, Catherine Steege, Dean Panos)

  • Claims Agent: Omni Management Group Inc. (*click on company name above for free docket access)

New Chapter 11 Filing - Wordsworth Academy

Wordsworth Academy

• 6/30/17 Recap: Loyal PETITION readers know that we love lending snarky editorial color to chapter 11 filings. But sometimes things go beyond the pale and just aren't funny. This is one of them. This entity is a Pennsylvania non-profit corporation that provides education, behavioral health and welfare services to nearly 5,000 children who have emotional, behavioral and academic challenges. Why did it file? The company claims it needs an operational restructuring but there is a critical overhang here: a resident of one of the facilities died while being restrained. On top of that, there were other "allegations of other serious problems" at the same facility where the death occurred. There is an ongoing wrongful death suit against the company. Litigation appears to have pushed this company into bankruptcy, plain and simple. Tragic, sad, and definitely not amusing.
• Jurisdiction: E.D. of Pennsylvania
• Capital Structure: $4.7mm debt (M&T Bank)    
• Company Professionals:
  • Legal: Dilworth Paxson LLP (Lawrence McMichael, Peter Hughes, Anne Aaronson)
  • Financial Advisor: Getzler Henrich & Associates LLC (William H. Henrich)
  • Claims Agent: Donlin Recano & Company Inc. (*click on company name above for free docket access)
• Other Parties in Interest:
  • Secured Lender: M&T Bank 
    • Legal: Reed Smith LLP (Peter Clark II, Jennifer Knox)

Updated 7/11/17