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Storytelling files reorganization plan

The International Storytelling Center filed a disclosure statement and plan of reorganization in its bankruptcy case Dec. 29, 2011, two days before the deadline.
According to the document, the ISC “believes that the plan is feasible, fair and equitable and that confirmation of the plan is in the best interest of creditors.”
ISC filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code on Dec. 31, 2010. The disclosure statement says the filing was principally triggered by three events: the worldwide recession, which led to declining attendance at the festival; the obligation to the National Storytelling Network for 18 percent of the festival’s gross revenues under an agreement formed when the two organizations split from the National Storytelling Association; and the inability of ISC to pay on its debt to Rural Development.
At the time of the filing, ISC owed $2.6 million to USDA Rural Development for loans that helped finance the construction of the ISC building in downtown Jonesborough in 2002.
The last payment on one of the loans was Oct. 15, 2008, which indicates ISC was in default for more than two years on the loan as of the bankruptcy petition date. Rural Development had issued notice that it intended to commence foreclosure proceedings in Spring 2011.
The culmination of these factors, in addition to the inability to pay operating expenses in a timely manner, left the organization with few options. The bankruptcy filing enabled ISC to obtain a stay of the planned foreclosure in order to determine if it could restructure the indebtedness to Rural Development and retain the Storytelling Center. ISC continues to operate its business and manage its properties as a debtor-in-possession.
The proposed plan of reorganization includes a number of significant changes designed to strengthen the organization and aid in its recovery, perhaps most significantly the surrender of its building.
Surrender of the Mary B. Martin Storytelling Hall
ISC has concluded it is not feasible to retain the facility and, at the same time, successfully reorganize. An unofficial agreement with Rural Development will allow the ISC to occupy the building until June 30. At that time, ISC will vacate and surrender the facility to Rural Development in consideration of the reduction of Rural Development’s secured claim by $1,319,000, the court-determined value of the property. The balance of Rural Development’s claim will be treated as an unsecured claim under the plan.
Payments to creditors
A total of 35 claims were filed as of the May 2, 2011, deadline. ISC estimates the amount of allowed claims will range from $1.7 to $2 million. Creditors holding claims to which objections have been filed or are disputed will not be eligible for distributions until the objections are resolved, though ISC does not anticipate many claim objections. Creditors whose claims will be modified in terms of principal, interest, length of time for payment, or a combination of the above, are entitled to vote on the reorganization plan through ballots that will be presented upon court order.
Role of the reorganized ISC
While ISC will continue to conduct business as a not-for-profit 501(c)(3) tax-exempt entity, it will be limited to the annual production of the National Storytelling Festival and the Teller-in-Residence Series. After June 30, these programs will relocate to an alternate facility in downtown Jonesborough. ISC will operate from its offices in the Chester Inn through a sublease and occupancy arrangement with the Heritage Alliance that includes no rental obligation. The organization will continue to fulfill its mission of advancing the performance, preservation and application of storytelling. ISC will seek additional support through grants from the Tennessee Arts Commission and others, as well as donations or gifts from its beneficiaries and the general public.
Management and financial oversight
Within the next year to 18 months, the ISC Board of Governors is expected to hire a new president and chief executive officer. Until that time, the Board of Governors, Director of Finance Sandy Reaves and Director of Programs Susan O’Connor will be responsible for the management duties formerly performed by Jimmy Neil Smith, who will serve in the new role of founder and president emeritus. The financial oversight of ISC has been assumed by a Finance Committee consisting of three members of ISC’s Board of Governors who meet on a weekly basis to review the prior week’s financial activities, analyze the budget, and approve upcoming expenditures. The board members who comprise the Finance Committee are the only individuals with check-writing authority on behalf of ISC. The Finance Committee has final decision-making authority relative to any expenditure of ISC funds. The Board of Governors intends for these conservative fiscal policies to be continued after the ISC emerges from bankruptcy. ISC anticipates retaining eight full-time employees.
Remaining assets
Upon surrender of the storytelling facility, ISC’s assets will consist of cash, inventory, furniture and equipment. As of Dec. 21, 2011, the assets were valued at $379,000. The cash portion includes $139,000 in 2012 festival preregistrations and $1,500 in 2012 prepayments for rentals of the facility.
National Storytelling Festival
The 2011 Storytelling Festival was conducted by ISC on Oct. 7-9. Attendance was at the approximate levels of 2009. ISC concluded its bankruptcy filing did not have a negative impact on festival attendance in 2011, nor does it anticipate the bankruptcy filing will have a negative impact on the 2012 festival or future festivals. The scheduled dates for the 2012 festival are Oct. 5-7. ISC has received a permit from the Town of Jonesborough to conduct the 2012 festival and believes that, if the plan is confirmed, it will be able to produce a well-attended festival for 2012 and future years.
Next step
If the disclosure statement is approved, the bankruptcy court will set a hearing to determine if the plan has been accepted by the required number of holders of claims and if other requirements for confirmation of the plan outlined in the Bankruptcy Code have been satisfied. The plan may be confirmed even if not accepted by all voting creditors if the court finds the plan does not discriminate unfairly and is “fair and equitable” with respect to each class of claims.