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Bank of America releases liens on ISC income despite previous objection to do so

Bank of America released its liens on the International Storytelling Center’s post-petition festival fees, grants, donations, and other income during the Feb. 15 hearing in the Bankruptcy Courtroom of the James H. Quillen United States Courthouse in Greeneville.
Interestingly, the bank filed a strong objection just one day before the hearing with a request to deny ISC’s cash collateral motion “because Bank of America’s interests in cash collateral is not adequately protected.”
The objection states, “The debtor contends that none of the cash it currently has on hand in any of its bank accounts is subject to any of Bank of America’s interests. This is simply incorrect. As noted, Bank of America has properly perfected liens in the debtor’s equipment, inventory, accounts and general intangibles.”
Bank of America, in its objection, laid claim to festival fees, the Tennessee Arts Commission grant funds, and any funds received from the sale of Teller-in-Residence tickets, the sale of books, tapes and storytelling merchandise, and the rental of the debtor’s facilities, and “does not consent to the debtor’s use of the same to fund its business operations, absent some adequate protection of its interests therein.”
This objection was not mentioned during the Feb. 15 hearing, which was Bank of America’s first appearance in court. When asked about the paperwork filed by the bank one day earlier, ISC attorney Mark Dessauer, of Hunter, Smith and Davis LLP, said the issues had been resolved. Overnight, evidently.
While Bank of America did retain its lien on gift shop inventory, the ISC is allowed to use the proceeds from sales. The bank also reserved the right to assert a secured claim on the ISC’s equipment.
Patricia C. Foster, Attorney for the U.S. Trustee, had no objection to the agreement.
Bank of America is the second of two creditors listed as holding security agreements with the ISC in its Chapter 11 Bankruptcy filing. New People’s Bank gave up its liens to post-petition property during a Jan. 18 hearing.
According to Dessauer, another hearing will not be scheduled unless an objection is received during the next phase of the bankruptcy process, which is the development of a plan to deal with the creditors. ISC’s first step is an attempt to separate itself from the National Storytelling Network.
Dessauer said he filed a motion Feb. 11 to reject the three agreements the ISC formed with the NSN when the organizations split from what was once named the National Storytelling Association.
The first agreement involves restructuring to form the ISC and the NSN. The second describes operation of the International Storytelling Festival, which is to be produced and run by the ISC. The third agreement is a settlement as a result of mediation in 2004.
The relationship between the two organizations will be dissolved unless an objection is filed, Dessauer said.
However, an objection would seem likely because the agreements direct 18 percent of the gross revenue from the storytelling festival goes to NSN.
In addition, Corporate Treasurer Bob Johnson attended the Jan. 31 meeting of creditors and alleged the agreements also list NSN as a co-owner of the festival. He requested and was granted permission to become a member of the Unsecured Creditors Committee.
Dessauer said he intends to file a plan for the ISC’s repayment of its creditors once the issue with NSN is resolved.
According to Dessauer, the ISC has the exclusive right to submit a plan to repay creditors for 120 days from the bankruptcy filing, which would be April 30. He said he doesn’t know if they will need to apply for an extension .
Acting on advice from Dessauer, the ISC has already advised the Town of Jonesborough and Community Performance International it will not be able to honor its agreement to directly fund the in-school story collection/performance project in Jonesborough Elementary School and Jonesborough Middle School.
The ISC originally agreed to pay CPI $32,945 in four payments beginning Feb. 15.
The Board of Mayor and Aldermen during its Feb. 14 meeting approved allowing the remaining expenses for the school program to be included in the money allocated for CPI activities from the town’s Mary B. Martin funds, but only with the agreement the total cost will not exceed the $119,000 already approved.
In lieu of the promised cash dollars, the ISC has committed two staff people to aggressively seek sponsorships and promote block ticket sales for student performances at the McKinney Center in late May following the Jonesborough Yarn Exchange. Sponsorship agreements obtained by the ISC will be between the Town and the sponsor, with no funding going through the ISC.
In another demonstration of its optimism for continued involvement in Jonesborough, the ISC has submitted applications for special event permits for the 2011 and 2012 storytelling festivals. The 40th anniversary of the festival, in 2012, will be heavily promoted during this year’s festival.
BMA members approved the permits on the condition that both festivals are operated and controlled by the ISC. If, for some reason, the ISC was prevented from operating the festival, the permits are automatically revoked.