With the amount of money he owes dwarfing the value of his assets, Bowlski’s Alley in El Jebel has proposed a bankruptcy exit plan that hinges on staying in business and receiving approval from creditors.
“The Debtor (Bowlski) believes that the Plan, as proposed, is feasible,” the proposed plan said. “The financing of the Plan will come from the continuous operations of the Debtor”.
A plan confirmation hearing is scheduled for July 28 in Denver, where certain creditors will vote on the plan that would also need court approval.
Bowlski filed for bankruptcy protection Jan. 2 in Denver after a disagreement with his owner, Crawford Properties. The Chapter 11 filing “was motivated by a combination of issues,” the exit plan said. “The COVID pandemic caused the closure of the business, followed by operational restrictions, which created cash flow problems for the Debtor. The problem was compounded when the sprinkler system at the Debtor’s leased premises failed, causing the business to close for a period of time. The second closing further aggravated the cash flow crisis. In addition, the cash flow issues from the COVID restrictions left the Debtor with limited cash to handle the closure caused by the issues with the leased premises sprinkler system.”
However, attorneys for Crawford Properties have argued in court documents that Bowlski’s was behind on rent before the pandemic hit in the spring of 2020.
The proposed plan said that Crawford Properties would be reimbursed $75,000 over a three-month period, starting one month after the agreement takes effect. Bowlski’s lease with Crawford Properties dates back to August 2016.
Bowlski’s has been able to operate through bankruptcy using the lender’s cash, which was approved by the court. That deal expires July 31, and Bowlski’s is seeking bankruptcy court approval to continue another six months with more cash from the lender, according to a motion filed Tuesday.
Creditors filing secured claims in bankruptcy proceedings include the Colorado Department of Revenue, for $27,922; Veritex Community Bank, for $352,732; and the SBA, for $158,183, according to bankruptcy records.
Bowlski made payments to Veritex Community Bank and the department of revenue, which “during the bankruptcy case … reduced the amount owed to the taxing authority,” according to the proposed plan.
The plan calls for Bowlski to pay Veritex over a 10-year period at 6% per year and pay the revenue department over 5 years at the legal interest rate.
Bowlski’s has just over $200,000 in assets including machinery and equipment comprising $183,850 of the sum, according to the plan. The bowling alley’s unsecured debt exceeds $500,000.
“The total of these Guaranteed Claims exceeds the value of the Debtor’s guarantee,” the plan said. “Therefore, there is no equity in the Debtor’s assets if those assets were sold in liquidation.”
Unsecured claims against Bowlski’s estate total $161,518.
One month after the plan is approved, if that is the outcome, Bowlski’s will deposit 8% of your gross receipts into an unsecured creditor account for the first year of the plan. That amount would increase to 9% the next year, 11% the following year, 12% during the fourth year and 15% during the fifth year. Creditors would be paid quarterly under the plan.
Under the plan’s revenue projections for Bowlski’s, the business would reduce debt to unsecured creditors by $88,305 in the first year. That amount will rise annually to $132,111 for the fifth year.
“The Projections show that the Debtor will have sufficient income to satisfy the payment to the creditors after covering its other expenses,” the plan said.
Bowlski’s has retained legal representation from Wadsworth Garber Warner Conrardy PC and the Law Offices of Kevin S. Neiman.