GRAND RAPIDS — BarFly Ventures LLC, the parent company of the HopCat chain of beer bars, has filed for Chapter 11 bankruptcy this morning in the U.S. Bankruptcy Court for the Western District of Michigan.
The company said in court documents that it had $1 million to $10 million in assets and $10 million to $50 million in liabilities.
BarFly Chairman and founder Mark Sellers III told MiBiz the company had accrued debt in the last few years to expand its locations outside of Michigan.
“We didn’t have a pristine balance sheet,” Sellers said, adding that “COVID hit and pushed everything over the edge. It started to cascade on us. We probably could have found some investors to help capitalize the company if it wasn’t for COVID, but once that became an issue, no one would invest in restaurants.”
BarFly operates more than a dozen HopCat locations in Grand Rapids, Holland, Kalamazoo and East Lansing, as well as in Southeast Michigan and throughout the Midwest. The company also runs Grand Rapids Brewing Co. and Stella’s Lounge in Grand Rapids. Sellers said the restaurants and bars will reopen amid the bankruptcy proceeding.
Last week, HopCat was evicted from its Royal Oak location after being unable to make lease payments. Sellers said HopCat bars in St. Louis, Chicago and Port St. Lucie, Fla., “were a drag on the company. Those three in particular were losing money. We closed those restaurants but we couldn’t get out of the leases. We can’t sustain a business having dead rent.”
The largest unsecured creditor is Jeffersonville, Ind.-based First Savings Bank Small Business Lending for $6.6 million for a Paycheck Protection Program Loan. Sellers said negotiations will continue with the creditor: “I don’t know what it’s ultimately going to mean.”
Others include Grand Rapids-based Gordon Food Service for more than $1.7 million; and Kalamazoo-based property owner Innovo Development, the landlord for the HopCat location in Royal Oak, for $79,517.
Other West Michigan-based unsecured creditors include Consumers Energy ($35,400), Happy PR ($14,000) and HR Collaborative LLC ($6,337).
BarFly estimates that it has 50-99 creditors, according to the court filing.
In a board resolution authorizing the company to file for Chapter 11, the company said it has also engaged Rock Creek Advisors LLC to provide financial advisory services and Mastodon Ventures Inc. as an investment banker.
BarFly is represented in the case by Warner Norcross + Judd LLP and Pachulski Stang Ziehl & Jones LLP.
The company filed for bankruptcy on the same day it announced that its Michigan restaurant locations would be reopening on June 13, with Nebraska and Indiana locations to follow on June 22. Sellers anticipates 12 HopCat sites will reopen. All of BarFly’s restaurants have been closed since mid March because of the coronavirus.
In a statement, HopCat said it planned to honor all customer gift cards and loyalty programs and pay employee wages and benefits and vendors and suppliers “in a timely fashion.”
Separately, Sellers is the owner of tiki bar Max’s South Seas Hideaway at 58 Ionia Ave. SW in Grand Rapids. The company was sued April 16 in Kent County Circuit Court by Grand Rapids-based contractor Wolverine Building Group Inc. over $400,000 in unpaid bills.
Max’s paid Wolverine $100,000 out of a $500,000 contract that Sellers personally guaranteed, according to a court filing. Sellers declined to comment on the suit.
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