Wednesday, March 9, 2011

NJ Motorsports Park Filed Bankruptcy

The Daily Journal
Written by: JOSEPH P. SMITH

"MILLVILLE -- The fact that New Jersey Motorsports Park got through its 2010 season is a debt it owes, literally and figuratively, to the Millville Rescue Squad.

One result of the federal Chapter 11 bankruptcy protection motion the park filed Monday is that the privately owned park's financial picture is now public business. Everything from ownership portions, to mortgage structure, to outstanding vendor balances is disclosed -- or soon will be.

According to court papers, the Motorsports Park's largest local creditor is the Millville Rescue Squad. The park fell behind $520,035 on payments to the private nonprofit last year. The squad provides a range of emergency response services, without which the park cannot operate.

"As the debt was accruing, we knew that discontinuing service would stop track operations and cost people jobs," Rescue Squad Chief John Redden said Tuesday.

Last month, with the squad threatening to hold back its services for the 2011 season, an agreement was reached to repay the debt. The terms of the deal require a $200,000 payment to the squad by this Friday, and another $200,000 in July.

The remainder of that debt will be settled in monthly payments, along with concurrent 2011 payments, park and rescue squad officials said.

Among other details contained in the massive bankruptcy filing is the park's gross annual income. Since opening in 2008, it has averaged about $9 million annually from racing events and concessions, a sum an official said is less than projected. The park, which employs 250 full- and part-time workers, has spent more than $45 million on capital improvements, of which half was paid to contractors in Cumberland County, according to the court papers.

Joseph Savaro, a partner in the Motorsports Park, said the recession's impact on residential and commercial real estate depressed the park's earnings. Efforts to sell villas, or townhouses, at the park took a particularly hard hit, he said; only eight are sold.

"We still have faith in the project," Savaro said. "We'll get through this Chapter 11. A lot of companies have been through that."

Savaro said the proposed construction of a motocross facility, called the Field of Dreams, also is important financially.

"That clearly would have helped us," he said. "We tried to create critical mass and have diversity. We're still going to attempt things to turn it around, but the Chapter 11 helps us get on our feet."

Park owners want to restructure their debt and continue to operate the facility, including the upcoming season of scheduled races. But what happens next is up to the judge overseeing the bankruptcy proceedings.

Even the validity of the Motorsports Park deal with the rescue squad is now in question -- thanks to the bankruptcy filing.

An attorney the squad hired to sit in on talks with the park advised the nonprofit squad is in a "positive position" even if bankruptcy occurred, Redden said. And Motorsports Park officials said their attorneys advised the deal with the squad will stand despite court oversight.

However, the parties acknowledge there is a chance the presiding judge may disagree.

"It's in the hands of the court right now," Redden said. "We'll be consulting with an attorney to determine how we proceed."

Monday's filing lists the park's top 20 creditors -- that is, businesses to whom it owes money. Court documents indicate there are 150 creditors in total.

Topping that list is Merrill Lynch Mortgage Capital Inc., now part of Bank of America. The bank is owed about $30.54 million, although it has "knocked down" the amount to $20 million to aid the park in its reorganization plan, according to the filings.

Other area creditors include Henry Cifaloglio Inc. of Buena, at $14,003; Kavanagh, Kavanagh & DiLazzero LLC of Millville, $9,684; and Waste Management of New Jersey at $8,374.

Also owed money, but in a separate category, is the Cumberland County Empowerment Zone Corp.

The Empowerment Zone, which is federally funded, loaned $425,000 to the park at a 5 percent interest rate to go toward 2010 operating funds.

Jeannine MacDonald, the zone's executive director, said Tuesday the loan is guaranteed with personal notes from park investors Lee Brahin and Harvey Siegel. The bankruptcy proceedings should not have an impact on the debt, she said.

MacDonald said the park paid only interest on the loan through 2010. The principal was due this past December but has not been paid, she said. MacDonald said the park in January started making payments of both principal and interest on a 10-year amortization schedule.

"We are of course concerned about the local vendors and the long-term success of the park," MacDonald said. The zone has met with the park about the loan, but put further talks on hold to let the bankruptcy case proceed further, she said.

Savaro said Tuesday the owners have no interest in selling the establishment and that the park's managing partners remain Lee Brahin and R.J. "Dick" Valentine. However, the reorganization is affecting the ownership structure.

The reorganization plan calls for fresh capital of at least $2 million from an entity identified as NEI Motorsports LLC, a group headed by Valentine. NEI also includes some new investors.

In return for the $2 million, the papers indicate NEI receives enhanced ownership rights.

The filing states the $2 million is meant to meet the costs of the restructuring, including:"

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