Greater Harrisburg's Community Magazine

HMAC finds first potential buyer in York-area investor.

One month after its owners filed for Chapter 11 bankruptcy, the House of Music, Arts and Culture (HMAC) has a potential local buyer.

Christopher Werner, a Dover, Pa., resident who owns a sports memorabilia company, has formed a limited liability company and taken the first steps to purchase the midtown Harrisburg business, which houses a full-service kitchen, bar and two performing stages.

HMAC managing partner John Traynor revealed the offer at a creditors meeting held this morning in U.S. Bankruptcy Court for the Middle District of Pennsylvania, in the Ronald Reagan Federal Courthouse.

The meeting was open to all of HMAC’s three dozen creditors, including Werner, who already has $150,000 of unsecured claims invested in HMAC. His investment makes him HMAC’s second-largest unsecured creditor, according to bankruptcy filings.

Werner has submitted a “speculative” term sheet outlining basic terms and conditions of the sale, said Robert Chernicoff, HMAC’s bankruptcy lawyer.

Chernicoff did not submit the term sheets to the bankruptcy court. He said he would rather wait until Werner signs an agreement of sale or letter of intent.

Neither Traynor nor his attorney disclosed the dollar amount of Werner’s offer. Chernicoff said it could be a “stalking horse bid” – a low-ball, initial offer that sets a price floor and drums up interest from other buyers.

Attempts to reach Werner on Thursday were unsuccessful.

Traynor said HMAC’s owners will still market the business and entertain offers from national buyers. He hopes to close on a sale in early 2019.

Traynor has previously said he would prefer to find a local buyer.

“My desire is personal – I want to see HMAC flourish as a community asset,” he said this morning, as he was questioned by U.S. Trustee Office attorney Gregory Schiller.

HMAC was valued at $5 million in a 2012 appraisal, Traynor said. According to Chernicoff, its assets include a $1 million matching funds grant that HMAC was promised in December 2017.

HMAC has not claimed any reimbursements from that grant, which is administered by Pennsylvania’s Office of the Budget. Traynor said he has until the end of the year to submit invoices for eligible projects.

HMAC’s assets also include its liquor license, which Chernicoff valued at $150,000.

Traynor recently defended that license in court, since the Pennsylvania Liquor Control Board challenged its renewal earlier this year.

This morning’s meeting, which was required under federal bankruptcy code, offered HMAC’s three dozen creditors the chance to question Traynor under oath. But only one creditor, a solicitor representing the City of Harrisburg, appeared in person. A representative from United Bank in Fort Lauderdale, Fla., also attended over the phone.

It’s not unusual for creditors meetings to be sparsely attended. Chernicoff said the turnout of two creditors and one reporter was more than he expected.

The hearing also allowed Traynor to testify about the conditions that led HMAC’s owners to voluntarily file for Chapter 11 bankruptcy protection in August.

Under oath, Traynor gave statements consistent with those he provided to the media in recent weeks. He said that that HMAC’s revenues dipped after a July social media storm led customers and performing artists to boycott the business.

“Just prior to filing, we had some social media issues which caused us a great deal of stress, and we suffered losses to our monthly operating cash flow,” Traynor said.

HAMC became the target of online discussions in July after a woman claimed that she was drugged at its bar and later raped.

The Harrisburg Police Bureau investigated the woman’s allegation and charged a Harrisburg man with her assault. But police officials said that HMAC was not responsible for the crime, which happened in a private home, hours after the establishment closed.

According to Traynor, the woman’s allegations were “conflated” with other grievances against him and his business.

Traynor said the business revenues dropped $100,000 in August. They lost an additional $200,000 when performing artists cancelled shows that were booked months in advance.

HMAC must turn $80,000 in monthly gross revenues to break even, he said. They’re on track to bring in $65,000 or $70,000 in September.

“We’re slowly recovering and working on our programming,” Traynor said.

Traynor told TheBurg earlier this month that he intends to press charges against individuals who allegedly urged bands to terminate contracts with HMAC. Chernicoff said this morning that those suits have not yet been filed.

Chernicoff said that little distinguishes HMAC’s case from the other restaurant bankruptcy filings he’s overseen.

“Restaurants have a habit of coming back [from bankruptcy,]” Chernicoff said. “It’s a tough industry, and you can easily have issues with cash flow.”

He estimated that 70 percent of small business filings end in a sale. Though he conceded that HMAC would be a “difficult” business to market, he hopes that Werner’s interest will generate interest among other prospective buyers.

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