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≡ GRAND SLAM TRACK ≡
After the cancellation of its fourth meet last June, Grand Slam Track sent letters to its hundreds of creditors, asking them to take 50 cents on the dollars and indicting there was “an outside party” interested in acquiring Grand Slam Track, but only if “debt-free.”
It appears the machinery is now being arranged to make that happen.
A brutal and clever plan to settle the financial affairs of Grand Slam Track and start over with a clean slate has been filed with the U.S. Bankruptcy Court in Delaware, outlining a complicated and stunning plan.
Please follow this carefully; it’s complex:
● “The Debtor has insufficient assets to provide recoveries to its creditors and acknowledges that unfortunate reality and the burden on its creditors.
● “Nevertheless, as forecasted by the Debtor, the Debtor has been negotiating with interested parties to provide the Debtor with funding in order to give some recoveries to its creditors and put its creditors in a better position than they would be in under a liquidation of the Debtor.
● “To that end, the Plan provides for the continuation of the Debtor’s operations through the Reorganized Debtor through a transaction whereby an entity to be formed and owned and controlled at least in part by Michael Johnson (or his designee) (the “Plan Sponsor”) will pay cash to the Debtor’s estate in an amount sufficient (after application of the Debtor’s Cash on hand) to
“(i) pay or otherwise satisfy in full Allowed administrative, secured, and priority claims,
“(ii) fund the Distributions to holders of Claims in Classes 3A and 3B as set forth herein (totaling more than $6 million),
“(iii) fund the Pro Rata Distribution to holders of general unsecured claims in Class 3C as set forth herein, and
“(iv) fund a reserve for the Reorganized Debtor and the Plan Administrator, as the case may be, to consummate the Plan and close the Chapter 11 Case (collectively, the “New Value Contribution”) and, in turn, the Plan Sponsor will receive 100% of the new equity interests in the Reorganized Debtor, with equity interests in the Debtor to be cancelled.”
Digging further into the filing, the plan proposed does this:
● Winners Alliance, the for-profit arm of the Professional Tennis Players Association, which has already invested $13.0 million into Grand Slam Track and an additional $2.305 million in bankruptcy costs, “will provide all or part of the exit financing for the Plan Sponsor.”
That’s the money to pay off the existing debt, identified in the reorganization plan as $31.4 million.
● But only a fraction of that amount is proposed to be paid. According to the proposed plan, payments would be made:
(1) To fund the $2.35 million in bankruptcy loans from Winners Alliance, $5.0 million in Winners Alliance loans and $34,300 in “Priority Non-Tax Claims.”
(2) Fund $6.0 million of the $7.0 million owed to athletes (Class 3A: 85.7%).
(3) Fund $82,000 out of $97,000 owed for “Allowed Critical Vendor Claims” (Class 3B: 84.5%).
(4) Fund $200,000 out of $12.9 million in “Unsecured Vendor Claims” (Class 3C: 1.55%).
In rough terms, that means about $13.7 million out of $31.4 million of Grand Slam Track’s debt (43.5%) would be paid and the rest would be vaporized in the bankruptcy process.
Who is the “Plan Sponsor” to pay these amounts? That would be “an entity to be formed in connection with the Plan, which shall initially and at least in part be owned and controlled by Michael Johnson (or his designee),” with Winners Alliance stated to be the source of the funds.
The next hearing on the plan is scheduled for 11 March, with a further hearing scheduled for possible approval of the plan on 16 April.
A vote of the creditors is required and the document states that failing approval of the plan, a Chapter 7 liquidation would bring the unsecured creditors possibly even less, but would certainly bring the athletes less.
Observed: In essence, the 64-page plan pays off most of the athlete debt, pays essentially nothing to everyone else (including Johnson, who is personally owed $2.2 million for a $2 million loan and expenses) and starts fresh.
This is both brutal and clever. It gets Grand Slam Track into the position its unnamed investor wants, to start debt-free, and Winners Alliance is clearly ready to play along, spending more millions.
Would anyone want to help a second version of Grand Slam Track without being paid in advance? Even then?
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