After being dark for three months, the Pasadena playhouse, established in the 1920’s, made a difficult decision and chose to file for Chapter 11 bankruptcy in 2010; making it the second Southern California arts organization to file for bankruptcy amid California’s strained economy. Based on a Los Angeles Times article written on May 12, 2010, at the time of filing the playhouse was indebted to between 1,000 to 5,000 creditors. Most of these creditors were subscribers whom paid money for plays that were not being produced. Another one of the playhouse’s primary creditors was radio station KOST-FM, which sued the famous playhouse in Los Angeles Superior Court for $31,300 plus interest and attorney fees stemming from a 2009 contract to broadcast 30 second commercials and on air give-aways.
The playhouse reportedly owed approximately $2.3 million, but only retained $102,000 in equity. Though the playhouse held assets upward of $7 million, $5.9 million came from pledged donations specifically for a 400 seat addition to the theatre, $1 million in fixed assets (such as office equipment, theater equipment, and improvements), $385,000 in accounts receivable, and $145,00 in prepaid insurance. In contrast, the liabilities against the playhouse included $422,000 in accounts payable, $1.1 million owed to subscribers, two different bank loans in the amount of $572,000, as well as a $49,000 loan from the city of Pasadena.
Fortunately for the playhouse, Chapter 11 Bankruptcy is designed to allow debtors to get back on their feet (so to speak). By filing bankruptcy, the Pasadena Playhouse was able to develop a plan that was acceptable to all creditors (or at least the majority) along with the bankruptcy court, which allowed it to reorganize and go back to business as usual. The playhouse, having been in production for nearly 100 years, is host to long-time and committed supporters of the theatre community, allowing them to receive seven figures in fundraising donations. In addition, the playhouse received a $1 million gift from an anonymous donor (according to a September 14, 2012 backstage.com article).
The post-bankruptcy rejuvenation of the Pasadena Playhouse may have appeared simple, but it was no easy task. Bankruptcy filings of all kinds, Chapter 11 included, are an extremely complicated process and should be handled delicately by an experienced and knowledgeable team of bankruptcy attorneys familiar with the Federal Rules relating to bankruptcy law. If your business is suffering from financial strain and lack of profits the DCDM Law Group can: 1) help determine if filing a Chapter 11 bankruptcy petition is the best option for your company and, if so, 2) provide the tools, guidance and expertise necessary to successfully file on your behalf. Contact us today to learn about your bankruptcy options.