Needling the Camel
After reviewing the Chapter 11 bankruptcy reorganization plan put forth last month by the Entertainment Collaborative's bankrupt Gypsy Tea Room, Green Room and Jeroboam, we can safely say we don't envy the current position of the formerly high-flying conglomerate. How'd it happen?
The Pinch: The EC was squashed in a triple-pronged pincer beginning with the September 11, 2001, terrorist attacks and the resulting slump in Dallas' convention and entertainment business. Two pressure points followed: the July 26, 2004, assault on David Cunniff at the EC's Gypsy Tea Room and the resultant lawsuit compounded by the EC's insurer's refusal to cover any losses over the incident, and the 2005 lawsuit filed by EC investor and Last Beat Records founder Caron Barrett. Barrett, who was in for $500,000, went after EC partners Whit Meyers and Brandt and Brady Wood for alleged mismanagement and other fiduciary misdeeds (the suit was stayed after the bankruptcy was filed). Oh, and then there's undercapitalization and failure to establish adequate internal controls and cash management. What's not mentioned is the smoking ban.
The Pickle: Combined, The Gypsy Tea Room, Green Room, and Jeroboam have roughly $212,700 in cash and disposable assets. After trustees fees and claims from various taxing authorities rear their ugly deductions, the companies will be $296,000 in the hole.
The Plan: To get back on track, the reorg calls for the liquidation of The EC and the defunct Trees live music venue. What could there possibly be to liquidate? According to Meyers, Trees has some sound and lighting equipment to auction off, and the EC has some stock in Obar. The old companies will then be disposed of and the assets will be rolled into new firms. Literally: New EC, New Green Room, New Gypsy Tea Room, and New Jeroboam. The New EC will be capitalized by an unsecured $40,000 loan rustled up by Meyers, and the Green Room will get a $20,000 infusion loaned from its landlord, Urban Labs I, Ltd.
Jeroboam will then undergo a complete makeover courtesy of tenant improvement funds and eased by a rent reduction. Opened in late 2000 as a French brasserie, Jeroboam will have its fa�ade and entrance architecture radically altered while it shrinks by 1,500 square feet, all in an effort to reposition it as a bistro/cafe with patio dining, an open-air bar and a seafood bar.
"The era of the white table cloth is behind us," declares Meyers. All of this, of course, is predicated on the approval of the reorganization plan by creditors and the bankruptcy court, which will hold a confirmation hearing, ominously enough, on September 11. "And if [the plan is approved] then, you know what?" asks Meyers. "We will have taken a camel through the eye of the needle." --Mark Stuertz