Beach Theatre Foundation Threatens Bankruptcy

CAPE MAY- The Beach Theatre Foundation (BTF) has offered the possibility of declaring bankruptcy if Cape May names the organization in a lawsuit to receive full payment of a $100,000 loan from the city.
City Council went into closed session Feb. 19 to discuss repayment of the loan made in 2007.
Bernie Haas, treasurer of the Beach Theatre Foundation, asked what was the intent of the closed session.
City Solicitor Tony Monzo said the purpose of the closed session was to discuss the status of guarantor obligations and the various responses to a letter the city mailed to the guarantors.
In order to secure the loan, the city required individual pledgers to agree to donate to the BTF amounts sufficient to repay the loan in the event the foundation could not. Several dozen concerned citizens and fans of the theatre, the majority being BTF trustees and local residents, stepped forward and signed pledges to stand behind the loan, according an earlier press release from BTF.
Haas said closed sessions often involved lawsuits and going to court. Monzo replied that was not the case at this point.
Haas read a statement on behalf of the Board of Trustees of the Beach Theatre Foundation.
“We do not know the exact nature of the closed session the council has chosen to have this evening concerning the BTF. We do know that, even though the BTF has paid back nearly half the $100,000 loan made to it within months of its original maturity, the city nevertheless has threatened to sue pledgers who had promised to contribute toward the repayment of that debt, but have not yet fully discharged their obligations,” said Haas.
“Clearly, the repayment record demonstrates we have been pursuing collections from our pledgers diligently, and we will continue to pursue them to avoid wasteful litigation. However, should the city commence a suit naming the BTF as a party seeking to collect the debt from our pledgers, the BTF Board feels it will have no recourse but to file a bankruptcy petition in federal court,” he continued.
“We understand the effect of such a filing will be to automatically stay any city legal action, may lead to the city being forced to disgorge collections preceding the filing, and ultimately could result in the city, as an unsecured creditor, sharing in any recovery with the rest of our creditors,” said Haas.
Last October, the city sent a letter to the foundation requesting the balance of the loan. The city utilized a Small Cities Grant program to fund the loan to the BTF, which the foundation then used to pay for a one year lease with option to buy the Beach Theatre from its owner, Frank Investments.
The Beach Theatre was demolished in October 2011.