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FOX VALLEY PRO: Reorganization Plan Has Liquidation Option

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Fox Valley Pro Basketball, Inc., submitted a Chapter 11 Plan and a Disclosure Statement.

The COVID-19 Coronavirus Pandemic has hit the entertainment and sports businesses particularly hard, including the Debtor’s business. The Debtor suspended its operations in early March 2020. March and April 2020 were projected to be the Debtor’s first profitable months because it had booked a significant number of events. State law prevents the Debtor from operating and the latest order prevents the Debtor from operating until at least May 26, 2020.

Upon suspending operations, the Debtor worked with agents for events booked and re-booked them for the summer – June and July. However, there is no certainty that COVID-19 Pandemic will have subsided by then. The Debtor has revised its projections. The projections assume one event in June 2020 and many of the events postponed by the COVID-19 Pandemic being held in July and August with operations stabilizing in September 2020. The projections assume that 2021 will be representative of income and expenses in the future. Revenue will likely go up over the long-term, as it historically does due to inflation, but expenses will also likely increase.

Terms of Plan

If the TIF Financing occurs, the terms of the Plan that contemplates the Debtor continuing to operate its business will be in effect. Creditors will be paid on the Effective Date. November 17, 2020 is the last day for the Debtor to close on the TIF Financing. The Plan proposes to treat claims as follows:

* Class 1: Allowed Claims of Bayland. It filed a claim for $12,655,307. The Plan provides that Bayland’s Secured Claim will be paid in equal monthly installments of principal with interest over 300 months with interest between 4.25% or under terms determined by the Court to be fair and equitable. If Bayland makes an makes an election under Sec. 1111(b) of the Bankruptcy Code, it will be paid 300 equal monthly installments of $63,000 or the amount determined by the Court to comply with Sec. 1111(b) for 300 equal monthly installments.

* Class 2: Allowed Claim and Administrative Expense of Two Willows. The Allowed Claim of Two Willows shall be paid in full in 180 equal monthly installments of principal and interest at the rate of 4.25% or the Court-Approved Interest Rate, commencing on the 15th of the first month after the Effective Date.

* Class 3: Allowed Unsecured Claims – Trade (Convenience; less than $1,000). Allowed Claims of creditors in Class 2 consist of Allowed Unsecured Claims of trade Creditors that total $1,000 or less. They will be paid on the Effective Date without interest. The Debtor estimates that the total amount for all Class 2 Creditors will be $16,383.

* Class 4: Allowed Unsecured Claims – Trade (Large Claims; more than $1,000). Allowed Claims of creditors in Class 4 consist of Allowed Unsecured Claims of trade Creditors that total more than $1,000. They will be paid on the Effective Date without interest. The Debtor estimates that the total amount for all Class 4 Creditors will be $834,751.

* Class 5: Allowed Unsecured Non-Trade Claims (Allowed Unsecured Claims of Investors, Insiders and Creditors with Claims of more than $500,000). They shall share $500,000 on a pro rata Basis. This is an estimated 3% dividend. Then, they will receive a note for 20% of the remaining Allowed Claim paid quarterly with 3% interest over 15 years after the Effective Date.

* Class 6: Allowed Voting Equity Interests. The Allowed Voting Common Stock Interests in the Debtor in Class 6 shall be cancelled.

* Class 7: Allowed Non-Voting Common Stock Interests. The Allowed Non-Voting Common Stock Interests in the Debtor in Class 7 shall be cancelled.

Resolution of Pending Litigation

Under the Plan, the Debtor will have the ability to resolve any litigation, including objections to claims, through a final order or settlement without notice or Court approval. The net recovery from litigation, if any, will be paid to the Debtor and will indirectly inure to benefit Class 4 (Non-Trade Unsecured Creditors), Class 5 (Equity –Voting Interests) and Class 6 (Equity – Nonvoting Interests) because they all share in the profits of the Reorganized Debtor after the Effective Date.

TIF Commitment

The Debtor had expected to have a solid commitment on Tax Incremental Financing (“TIF”) that would be used to fund payments to creditors on the Effective Date by April 29, 2020, the date of the hearing on the Disclosure Statement. However, the COVID-19 Pandemic stopped all efforts. Financial institutions were not interested in March or April in actively finalizing discussions, given that the Debtor had to suspend operation.

Additionally, in the Debtor’s schedules filed September 6, 2019, the Debtor listed a possible cause of action against Eric Hoopman for breach of contract. The Debtor has determined that it will not pursue the potential cause of action because it is unlikely to result in a net return to creditors. Accordingly, under the Plan, the Debtor releases Hoopman from alleged breach of contract claim listed in the schedules.

The TIF Financing has three contingencies that have not yet been met. It requires that the lender be granted a security interest in the Development Agreement and note from the City. However, the Development Agreement prohibits the note from being security for a party that is not liable for the real estate taxes on the Arena. City approval would be necessary for this contingency to be met. There is a chance the City will not approve the pledge of the note. However, the City has twice approved this contingency. Given this experience, the Debtor believes this contingency can be met. However, there is no guaranty that it will be. Another contingency is that Mr. Pierce and another Person guaranty the TIF Financing. The other Person must have sufficient net worth to cover the entire TIF Financing amount up to $5.2 million. The Debtor had been in discussions with Persons willing to provide the guaranty require. However, the COVID-19 Pandemic occurred and discussions ceased due to the Debtor’s suspending operations. The Persons wished to remain anonymous at this point. If this condition is net met, the TIF Financing may not be possible. Finally, the Debtor must be operating its business and have exited chapter 11.

Liquidation Option

If any of the contingencies are not met, the Debtor may not be able to obtain TIF Financing and fund the Plan. Orderly Liquidation If TIF Financing Not Obtained Because of the OCVID-19 Pandemic and its impact on the Debtor’s business, the Debtor has provided in the Plan for an orderly liquidation of the Debtor’s business and assets if the TIF Financing is not obtained. The Plan provides that if the TIF Financing does not occur by November 17, 2020, the assets that are Bayland’s collateral, including the Debtor’s rights in the Arena, will be transferred free and clear of Liens on the Effective Date, December 11, 2020 in satisfaction of Bayland’s Claim. Bayland will also have the exclusive option to purchase assets that are not included in its collateral at price sufficient to pay all administrative expenses, priority claims, the DIP loans from Two Willows and Windward Strategies, Inc. (“Windward”), and costs to cure defaults of unexpired contracts that it assumes. Notably, there are sponsorship agreements, other contracts and the TIF that are not included in Bayland’s collateral. The Debtor will assume and assign the executory contracts and unexpired leases to Bayland as it requests. All assets not purchased by Bayland, including the proceeds of the Bayland Preference Action, will be distributed to Creditor in the order of priority under the chapter 7 priority scheme, as it may have been adjusted during the chapter 11 case. For example, the DIP loan from Two Willows and Windward have the highest priority. This is the order of payment, as found at Section 6A.1 of the Plan:

(a) Costs of collection or liquidation of the assets, and costs to close the business of the Reorganized Debtor, including reasonable attorney fees, costs and expenses, but excluding amounts that may be due Insiders for their services. (Insiders are not being compensated for their services.)

(b) The Administrative Expense to Two Willows and Windward to the extent it has not otherwise been satisfied.

(c) Administrative Expenses under Section 3.1 of the Plan on a Pro Rata Basis if proceeds are insufficient to pay them all in full.

(d) Allowed Priority Tax Claims under Section 3.2.

(e) Allowed Section 503(b)(9) Claims under Section 3.3.

(f) Allowed Claims in Classes 3, 4 and 5, and the Allowed Unsecured Claim of Two Willows.

The Debtor has no expectation there will be sufficient assets for payment to any Creditors in Classes 3, 4 or 5. The Debtor expects administrative expenses and priority claims will be paid from the Bayland Preference Action. The administrative expenses and priority claims total $738,653D. The shortfall of approximately $230,000 will be satisfied by one or a combination of the following ways: payment from Bayland to purchase assets of the Debtor, including the TIF; payment from the operations of the Debtor as shown on Exhibit C; Windward that is owed $200,000 on its DIP loan agreeing to a different treatment under Sec. 1129(a)(9) of the Code; and/or Kerkman & Dunn that is projected to be owed $325,000 agreeing to a different treatment under Sec. 1129(a)(9) of the Code. The orderly liquidation will only occur if the Debtor is unable to close on the TIF Financing between the Confirmation Date, that is anticipated to be sometime in July or August, and November 17, 2020.

If the Debtor concludes that TIF Financing cannot be obtained, it will file notice of its conclusion with the Court and the Effective Date will occur 17 business days later, resulting in the orderly liquidation.

November 17, 2020 is the last day for the Debtor to close on the TIF Financing. The Effective Date can be extended until 17 days after the Confirmation Date. The Confirmation Date could be delayed past December 11, 2020 by an appeal or stay of the Confirmation Order.

A full-text copy of the Disclosure Statement dated April 20, 2020, is available at https://tinyurl.com/y7m8tfwc from PacerMonitor.com at no charge.

Attorneys for
Fox Valley Pro Basketball, Inc.:

Kerkman & Dunn
839 N. Jefferson St., Suite 400
Milwaukee, Wisconsin 53202-3744
Phone: 414.277.8200
Facsimile: 414.277.0100
E-mail: jkerkman@kerkmandunn.com

About Fox Valley Pro Basketball

Fox Valley Pro Basketball, Inc., is the owner of the Menominee Nation Arena in Oshkosh, Wis. The arena serves as the home of the Wisconsin Herd of the NBA G League and the Wisconsin Glow women’s basketball team.

Fox Valley Pro Basketball sought protection under Chapter 11 of the Bankruptcy Code (Bankr. E.D. Wis. Case No. 19-28025) on Aug. 19, 2019. At the time of the filing, the Debtor was estimated to have assets of between $10 million and $50 million and liabilities of the same range. The case is assigned to Judge Brett H. Ludwig. Kerkman & Dunn is the Debtor’s counsel.

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