The End of Emerald City?

This past Christmas Eve Johnny Chisholm got a large lump of coal in his stocking, in the form of motion by a Trustee in one of his ongoing bankruptcy cases...a motion that could very well spell doom for his Pensacola-based nightclub, Emerald City.

We haven't talked about this particular Chisholm business bankruptcy case here yet (there are a total of four out there, including CPCE...my eventual plan is to weave them into the upcoming timeline Part II project), so guess I should back up a bit and explain what it's all about. Filed on May 21, 2008, Emerald City of Pensacola, Inc. (the parent company of Emerald City) sought Chapter 11 bankruptcy protection against three large creditors: McBride Construction (has a lawsuit judgment lien for $351,964.99), Garrison Trust (made a loan collateralized by the club's very valuable liquor license, $95,466.31 is owed), and the Small Business Administration (made an SBA loan, $461,416.59 is owed). So, this was an attempt by Chisholm to restructure $908,847.89 worth of debt on his Pensacola nightclub.

And it doesn't seem to have worked out. Chisholm proposed a restructuring plan that involved Garrison Trust and the SBA getting paid more or less as originally agreed, and McBride Construction getting it's $350,000+ judgment debt paid at a rate of $5000 a month.

Not surprisingly, McBride Construction thought a plan that had them waiting almost 3 years after the end of the Mayan calendar to get paid in full was a sucky plan, and they rejected it outright on March 19, 2009:


This alone was enough to kill the deal, but to add insult to injury Garrison Trust objected that same day as well; they pointed out the plan did not compensate them for missed payments, as well as attorney fees, late fees, and interest called for by their loan agreement.

Anyways, fast forward to today, and it looks now like Emerald City may never be able to save itself. Citing the continuing plan rejection (among other reasons), on December 24th the Trustee in the case slid down the metaphorical chimney, and motioned for the court to either terminate the Chapter 11, or convert it to a Chapter 7 liquidation:



If this dismissal/conversion to a Chapter 7 is approved, Emerald City will likely be foreclosed upon/liquidated, respectively. Of course, a last minute sale and/or capital infusion is possible too, I suppose; but as the business is currently operating as a loss, this seems unlikely:


What effect Emerald City's demise will have on the closely related annual Memorial Weekend in Pensacola circuit event in May is unclear; I believe that's technically run by a completely different Chisholm entity: Chisholm Properties of Pensacola, LLC.

However, Chisholm Properties of Pensacola is also now in Chapter 11 bankruptcy (as of April 21, 2009).

Addendum 12/28/09: There will be a telephonic hearing on this motion January 22, 2010 (but now rescheduled to January 25, 2010).

Addendum 12/30/09: There is actually a similar motion pending to convert another Chisholm bankruptcy case, that of 800 Bourbon Street, LLC, from a Chapter 11 to a Chapter 7 liquidation.

800 Bourbon Street is the company that owns the building which houses the New Orleans nightclub Oz. So, it's basically "Oz the building," and it's been in Chapter 11 bankruptcy since June 11, 2008. It's not to be confused with another company (Louisiana Interests, Inc.) which actually owns "Oz the business," although both companies are controlled by Chisholm. Chisholm essentially pays himself rent in this arrangement. And "Oz the business" is not currently in bankruptcy (it actually emerged from Chapter 11 bankruptcy in December of 2007).

The 800 Bourbon Street bankruptcy is an interesting one which seems to have played a role the 2009 OMW disaster in a few key respects. So, it too will be incorporated into the upcoming timeline. I'll probably have more to say about it in a separate post as well.

Anyways, back to the news of today...as with Emerald City, 800 Bourbon's Chapter 11 seems to be unravelling now as well. A former Chisholm lawyer in the case and a court appointed accountant are not being paid according to the approved restructuring plan, so they've motioned the court for either their money, OR for the case to be converted to a Chapter 7 liquidation.

If 800 Bourbon is liquidated as a result of this latest crisis, this will not necessarily mean the closure of Oz. It will mean that the building will probably be sold to pay off it's creditors, and Chisholm will no longer be his own landlord.

A hearing on this motion is set for January 12, in New Orleans.




Addendum 12/31/09: Chisholm filed a response to the trustee's motion in the Emerald City bankruptcy case today:



The major problem here, it seems to me, is the continuing failure (for nearly nine months) to resolve all the issues with McBride Construction and Garrison Trust. It'll be tough to oppose this motion if those creditors arn't both somehow brought on board by the time of the telephonic hearing on the 25th. We'll see what happens then...

Addendum 1/5/10: The Emerald City telephonic hearing has been rescheduled to Monday, January 25.

Addendum 5/15/10: Chisholm has successfully appeased both of those two objecting Emerald City creditors, as on Thursday they each officially voted to approve the Chapter 11 plan. And yesterday the plan was approved by the judge at a telephonic hearing.

At the same time, however, rather serious problems have cropped up in yet another Chisholm Chapter 11 bankruptcy case, that of Chisholm Properties of Pensacola. That one was filed back on April 21, 2009 (right during the chaos of the OMW collapse...see timeline post here) and concerns a Chisholm company that owns a cluster of adjacent commercial properties on East Garden Street in Pensacola, Florida. One of the secured creditors in that case, Coastal Bank and Trust, won approval to lift the automatic stay in that case, so it could begin foreclosure on it's secured property:



Meanwhile, the Internal Revenue Service has not been happy about this case for a variety of reasons (failure to file delinquent returns, etc...), and as such, is motioning to have it either dismissed, or converted to a Chapter 7 bankruptcy:



A telephonic hearing on the IRS motion is scheduled for May 27.

Addendum 7/26/10: Chisholm filed the missing tax returns, and this seems to have been good enough for the IRS...they withdrew their motion:


So, barring any new surprises, it would appear that this Chapter 11 case will be approved by the creditors and the court.