A federal bankruptcy judge has approved a $150,000 loan for Conneaut Lake — the minimum its managers said was needed to open the historic amusement park later this month — and has set an Aug. 1 deadline for the park to file a complete Chapter 11 bankruptcy reorganization plan.
Chief U.S. Bankruptcy Judge Jeffrey Deller on Monday approved an expedited motion by Trustees of Conneaut Lake Park to take on $150,000 in new debt so the amusement park can open May 22.
The amount is half of the $300,000 in loan approval Trustees had requested from the court. A hearing on the remainder has been scheduled for next week.
Conneaut Lake Park’s total debts are currently about $3.8 million.
Trustees of Conneaut Lake Park is the nonprofit corporation that oversees the amusement park’s operation. The corporation filed for federal bankruptcy protection in December 2014.
“We’re very pleased with what happened today,” Mark Turner, the Trustees’ executive director, said following Monday’s teleconference hearing in federal courtrooms in Erie and Pittsburgh. “We’ve got interim financing and an extension to Aug. 1 for exclusively filing a reorganization plan.”
While the loan is $150,000, it is enough to open the park on time and have enough working capital to hire 65 summer employees for the park, Turner said.
“We’ll be ready for May 22,” Turner told the Tribune.
The $300,000 will be used by Conneaut Lake Park to pay costs for general administration of the Chapter 11 bankruptcy case, fund ongoing operating expenses and to make certain capital improvements to the park over a 12-month period into April 2016. The new loans come behind the park’s nearly $1 million in outstanding tax debt in terms of being paid off in the event all the park’s assets are sold in a liquidation.
During Monday’s hearing Turner told Deller the loans are integral to the park’s proposed bankruptcy reorganization plan as is a planned sale of a portion of excess lakefront property.
Eugene Herne, a senior deputy attorney general for the Pennsylvania Office of Attorney General, told the court the state would not oppose a possible land sale of the excess lakefront property.
The Pennsylvania Office of Attorney General is involved in the case because Conneaut Lake Park is held in a public trust with deed restrictions that its land must be used for public purposes.
Turner said Conneaut Lake Park has lined up two separate $150,000 loans — one from the Economic Progress Alliance of Crawford County, which is Crawford County’s lead economic development agency, and the other from the Northwest Regional Planning and Development Commission, a regional economic development agency. Commitment letters from each agency and loan terms were part the Trustees’ request.
Deller called the Trustees’ loan request “reasonable” and noted the “unique nature of the business.”
“To open on opening day you have to have employees there,” Deller said in granting the $150,000 loan from the Alliance. Deller deferred taking action on Northwest Regional loan until May 19.
The loan from the Alliance is for four years at 4 percent interest annually with no payments for the first 12 months and interest-only payments for months 13 through 24.
The loan from Northwest Regional Planning also would be for four years, but at 5 percent interest annually with no payments for the first 12 months and interest-only payments for months 13 through 24.
Principal and interest on each loan would be amortized over 24 months and payable in equal monthly installments starting on month 25 with all amounts due and paid in month 48.
The park’s creditors are still opposed to a reorganization plan for the amusement park and want a reorganization plan that would sell off the park’s assets, according to Larry Bolla, an attorney representing the park’s creditors.
“The day of this park as an amusement park has come and gone,” Bolla said.
Bolla said he’s prepared to file a Chapter 11 reorganization plan for Conneaut Lake Park, calling for the sale of the amusement park to pay off its debts.
Bolla represents Conneaut School District and the governments of Crawford County and Sadsbury and Summit townships, which are owed more than $927,000 back real estate taxes, interest and penalties.
“If this goes on much longer, the tax debt is going to be astronomical,” Bolla said, noting the interest rate on the tax debt is 9 percent per year.
The four taxing bodies filed suit against the park last September in Crawford County Court of Common Pleas trying to foreclose on the amusement park and force a sheriff’s sale for the overdue property taxes. The amusement park then filed for bankruptcy protection in early December, staying a proposed sheriff’s sale.
Keith Gushard can be reached at 724-6370 or by email at firstname.lastname@example.org.