MILLVILLE - Operators of the New Jersey Motorsports Park said Tuesday they expect to come out of bankruptcy protection in no more than 160 days, the time period during which federal courts should approve their financial restructuring plan.
When that happens, the park will receive a $2 million "cash infusion" from NEI Motorsports, an investor group that includes some of the park's owners, to help the raceway meet outstanding financial obligations, the operators said.
Under the Chapter 11 bankruptcy plan filed electronically with the federal courts on Monday evening, Merrill Lynch Mortgage Capital of New York will also reduce its $30 million in loans to the park by $10 million, said Lee Brahin, one of the park's managing partners. Merrill Lynch is the park's biggest creditor.
Meanwhile, the park will use $336,000 from Merrill Lynch interest and escrow accounts to help it prepare for the opening of the facility's racing season on Saturday, said Louis Lipsky, one of the park's business counsels. The courts are expected to approve that authorization on Thursday, he said.
Of that money, $200,000 will be paid to the Millville Rescue Squad on Friday or Saturday, Lipsky said. The rescue squad handles emergency medical services for the park and "without the payment of these essential services, the racetrack cannot, by law, operate," bankruptcy papers read.
The rest of the money will essentially carry the park through until it starts receiving regular revenues from facility operations, Brahin and Lipsky said.
"The proposed actions in the debtors' bankruptcy cases will have the effect of restructuring the debtors' secured debt, obtaining an infusion of much-needed capital from new investors and reorganizing the financial structure of the debtors' businesses," the park owners said in court documents. "The debtors anticipate that these bankruptcy cases will also have the effect of allowing them to continue operations seamlessly through the racing season and focus management's efforts in managing their businesses."
That includes paying off creditors, park officials said.
"It should really put us on solid ground," Brahin said.
Park officials said again on Tuesday that the facility will operate for the 2011 season, honoring all its obligations for everything from races to club memberships.
On Monday, track officials said the racing aspect of the facility was progressing well, but money from planned luxury villas, retail space and hotels never materialized. The inability to get those revenues made it hard for the park to be truly financially successful.
The park's board of directors voted March 2 to file the Chapter 11 bankruptcy petitions and hired the Philadelphia law firm of Cohen, Seglias, Pallas, Greenhall and Furman to represent the company.
The park's owners requested expedited Chapter 11 proceedings and that the petitions be treated as a "complex case," a designation that would aid in allowing the park to continue operations and to pay its bills. The court approved that request Monday evening.
Brahin said likely helping that decision was that the park had worked out agreements with creditors and other parties before seeking that relief.
According to the court documents, the park's 20 largest creditors are owed more than $33.1 million. That figure includes the $30 million in loans from Merrill Lynch.
Several weeks ago, the rescue squad agreed to provide emergency medical services at the park for the upcoming racing season. The park and rescue also agreed on a plan for the park to pay its outstanding debt to the rescue squad.
Rescue Squad Chief John Redden said in an e-mail Tuesday that the agreement with the park "secures our existing financial interests during this Chapter 11 restructuring and assures continued services to (the park) in the upcoming race season. I can confirm that the payment this week will be $200,000. Continued payments toward arrears will occur throughout the season, including timely payments for newly incurred services and $200,000 in July. (The rescue squad) is satisfied with this payment arrangement."
Listed in the court documents as one of the park's biggest creditors is the Cumberland Empowerment Zone, or CEZ.
CEZ Executive Director Jeannine MacDonald said the organization gave the park a short-term, $425,000 capital operations support loan in 2009. The money was used to help the park cover operating expenses while they negotiated a financial restructuring with Merrill Lynch, she said.
MacDonald said CEZ has "personal repayment guarantees" from park operators for repayment of the loan.
"At this point, we're not aware of any information that would make us concerned about repayment of the loan," MacDonald said, adding, "It's upsetting that this has to happen."
Although not listed in the bankruptcy filings as a creditor, city Development Director Don Ayres said Monday that the park also has a $600,000 Urban Enterprise Zone, or UEZ, loan that financed some start-up costs. The park is current on its UEZ loan payments and park principals provided "personal guarantees" regarding loan payoff, he said.
The court documents also list Ovations Food Service as being the park's second largest creditor, being owed more than $1.2 million.
The company's website lists offices in Lutz, Fla., and Pleasanton, Ca. The court documents list a contact for the company as a James H. Heller, an attorney based in Philadelphia. Heller couldn't be reached for comment.
According to the bankruptcy documents, the $2 million "cash infusion" from NEI motorsports will pay "all costs of the restructure." The documents state that:
- $500,000 can be spent on fees for attorneys, professionals and consultants. The plan also has contingencies in case the
- $500,000 doesn't cover all those expenses
- $50,000 will be used for "priority tax claims"
- $209,222 will be paid to Ovations Food Service. Lipsky said the park will also make monthly payments to the company for the next 10 years
- $368,000 will be put toward the claims if general unsecured creditors
- $336,000 will be put into fund reserves for things such as debt payment, insurance and taxes
- $500,000 will be allocated to meet the "operating and other liquidity obligations" of the reorganized company
- Funds to cover other expenses and debts
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