FAYETTEVILLE — A U.S. Bankruptcy Court judge approved the reorganization plan for The Fayetteville Athletic Club on Wednesday, clearing the way for the company to emerge from Chapter 11 bankruptcy by the end of the month.
Judge Ben Barry accepted the testimony of Fayetteville attorney Jason Bramlett of Friday, Eldredge & Clark that all protests to the club’s reorganization plan had been settled.
Bramlett said the order approving the plan would be filed by the end of the week.
“This is a good deal for everyone. It keeps the club going and moving forward, and generates cash flow to pay off debt,” Bramlett said Wednesday.
The plan calls for the formation of a new business entity to control the club, with current club owners Bob Shoulders and Katherine Shoulders running day-to-day operations and management.
The couple said Wednesday that they were happy to see an end to the past three years of legal negotiations. They have been upgrading and expanding the club’s offerings despite the bankruptcy, they stated in an update sent to members in February.
More than $500,000 in capital improvements, including a new cycling studio, new floors and lighting in two racquetballcourts, a new personal-training studio, added cardio- and strength-training equipment, outside lighting and new airconditioning units, were completed, the e-mailed update stated.
Bob Shoulders said Wednesday that the club remains profitable.
The club’s business entity, Athletic Clubs of America LLC, was forced into bankruptcy when a Florida-based com-pany bought outstanding loans against it and filed foreclosure on the club in Washington County Circuit Court in February 2009.
SM-WLJ Asset Owner LLC of Coral Gables, Fla., bought defaulted-loan packages marketed by the Federal Deposit Insurance Corp. after ANB Financial bank was closed in May 2008.
SM-WLJ Asset Owner attorney Andrew King, with Williams & Anderson in Little Rock, said Wednesday that the company declined to comment for this story.
The new club business is formed by two ownership groups, that of SM-WLJ with 90 percent and the Shoulderses with 10 percent. An option in the plan gives interested parties a chance to buy another 10 percent ownership from SMWLJ within three months of the plan’s effective date, or no less than 11 days after the court order, according to court documents.
All debt against the club would be eliminated, Bramlett said, except the claim bySM-WLJ.
Bramlett said the outstanding claims by SM-WLJ against the club, which totaled about $12 million, have been settled at $5.5 million, the principal of a mortgage at 5 percent interest payable quarterly that matures in three years.
Unsecured debts will be paid in accordance with a formula according to the claim, Bramlett said. Employees with claims at the time the case was filed will be paid in full, as will all tax claims. A loan on a bus will be paid in full on the plan’s effective date, and loans on other vehicles will be paid in accordance with the original agreements, he said.
The Shoulderses get an employment agreement for three years as an inducement to continue managing the business, court documents stated. Bob Shoulders will receive an annual salary of $90,000, Katherine Shoulders will receive a salary of $42,000, and both are entitled to prorated amounts should they be fired in the first year. Both will also receive benefits and lifetime membership to the club that extends to the couple’s children.
Business, Pages 21 on 03/10/2011