SVC enters Chapter 7 bankruptcy process

Posted
Don't miss the big stories. Like us on Facebook.  

BENNINGTON — The former Southern Vermont College has entered Chapter 7 bankruptcy, beginning the process of liquidation of the campus real estate and other assets that could include auctions.

David Newell, president of the board of trustees, said the board was dissolved and members resigned this week after approving a request from the institution's major lenders to enter Chapter 7 in U.S. Bankruptcy Court in the Vermont district.

He referred further comment to attorney Heather Cooper, of Facey Goss & McPhee, of Rutland, who is representing the college corporation.

Raymond Obuchowski, of Bethel, has been named the bankruptcy trustee who will consider issues around the dispersal of the assets and make recommendations to Bankruptcy Court Judge Colleen Brown.

Reached on Thursday, Obuchowski said he first expects to discuss with the principal mortgage-holder, Community Bank, whether an overall agreement can be reached to "carve out" some revenue from sale of assets for other creditors. The bank is owed approximately $5.5 million, which is secured by main campus real estate that is valued at about $5.7 million. 

Obuchowski said he would like to see agreements that would allow a court hearing on a sale of assets by the end of August.

Cooper said Thursday that she could not comment in detail about the filing. But she said she admires how Obuchowski recently worked to build collaborations toward the liquidation of assets of the former Hermitage Club resort in the Wilmington area.

"I have faith that will also happen in this case," she said.

Purchase agreement

The 69-page SVC Chapter 7 filing includes a detailed account of the former college's assets and financial liabilities, and of outstanding lawsuits or claims that could affect the final outcomes. With the Chapter 7 filing by the college, however, suits and similar actions or claims are stayed pending consideration by the bankruptcy court of any requests to lift a stay.

Also apparently stayed because of the filing are both an occupancy agreement for a planned event on campus and a purchase and sale agreement for the main campus — contracts the trustees recently entered into with Moshe Perlstein of Zichron Chaim. 

Article Continues After Advertisement

Newell said Thursday he could not comment about those agreements but did confirm that an event on campus is being planned. Perlstein could not be reached in time for this article for comment on the agreement or the organization.

Obuchowski said that one effect of the Chapter 7 filing could be to allow other parties besides Perlstein and Zichron Chaim to enter bids on the campus property, if the real estate goes to an auction.

371 acres

In terms of real estate, assets include the 371-acre college campus; student housing and educational buildings; an athletic center, and the Everett Mansion, all located along an access drive off Monument Avenue.The fate of the former Bennington Center for the Arts had been uncertain pending the outcome of a suit by founders Bruce Laumeister and Elizabeth Small, seeking to have their December 2017 donation of the facility off West Road to SVC annulled and to reclaim the center and museum and its contents. 

College officials said at the time of the donation that the school agreed to continue to operate the performance and gallery space as part of the SVC curriculum.

Article Continues After These Ads

That suit is now stayed as well, said attorney Lon McClintock, representing the former center owners.

"The case in the Vermont Superior Court is on hold," he said. "The issues raised in the Superior Court may be addressed by the Bankruptcy Court. Plaintiffs have the right to request a lifting of the stay so the Superior Court litigation may proceed in state court. A decision has not been made on whether to litigate plaintiffs' claims in Bankruptcy Court or in the Superior Court."

A major donor to the college, Frederic Poses, of New York City, also has filed suit against SVC — seeking to protect money he put in a collateral fund to benefit the school. That action likewise was automatically stayed by the Chapter 7 filing.

Poses put up $2 million in April 2011 to provide additional security for extension of $8.5 million in financing under a bond the college sought for campus projects and upgrades.

Terms of the loan security agreement included that the bank holding the mortgage could draw down bond payments from the $2 million account if SVC defaulted on its payments. The school did default in March 2019 after a plan to close SVC had been announced.

Assets, liabilities

Article Continues After Advertisement

According to the SVC filing, the major secured lender is Community Bank, owed more than $5 million. Poses is listed second as owed more than $2.2 million, and SVC Funding, LLC, is listed as owed $1,250,000. 

SVC funding is related to a group of college trustees who put up money prior to the closure toward stabilizing SVC finances through the spring 2019 semester.

All assets listed total nearly $15 million, including real estate of $5,750,000 for the main campus, $4.2 million for the arts center, and $369,900 for the Gate House building, located at the entrance to the campus road at Monument Avenue.

Secured creditors are listed as owed more than $8.5 million, and unsecured creditors are claiming more than $686,971 in total, according to the Chapter 7 filing.

The filing also includes an extensive list of works of art, furniture, building furnishings, equipment, vehicles such as college vans and trucks, and numerous items of property other than real estate.

Debt, enrollment

Citing mounting debt and declining enrollment, SVC joined several other small private colleges in 2018 and 2019 in announcing a closure or major changes brought on by serious financial shortfalls. The school ceased educational activities after the last class graduated in May 2019, and the campus has since been up for sale.

A private residential secondary school, the Oliverian School, of Pike, N.H., agreed to purchase the main SVC campus for $4.9 million in 2019, but the school decided in January to bow out after its due diligence process determined the campus would be too expensive for the school to maintain.

A Canadian businessman later apparently came to a tentative agreement to purchase some or all of the campus assets, but dropped out this spring after the coronavirus epidemic began to adversely affect the economy worldwide.

Jim Therrien writes for New England Newspapers in Southern Vermont, including the Bennington Banner, Brattleboro Reformer and Manchester Journal. Twitter: @BB_therrien


TALK TO US

If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.




Powered by Creative Circle Media Solutions