What happens when a non-profit goes bankrupt?
The YMCA of Greater Milwaukee emerged from bankruptcy on Friday, a much leaner, debt-free nonprofit that will rein in its mission to focus more intently on health and wellness and the development of young people.
U.S. Bankruptcy Judge Susan V. Kelley approved the YMCA's reorganization plan Friday, rejecting a last-minute bid by members of the South Shore YMCA to delay the plan while they tried to find a buyer that would keep their Cudahy branch open.
YMCA President and Chief Executive Officer Julie Tolan called the closure of that decades-old facility "the hardest part of this whole thing."
But she said the resolution of the bankruptcy was an "important moment" for the YMCA and the Milwaukee community.
"We are just so grateful," Tolan said, acknowledging the financial hit lenders — particularly BMO Harris Bank — will take as part of the reorganization plan.
"All of the parties have sacrificed greatly," said Tolan.
"We're so appreciative of the way the community has come together...to demonstrate that the Milwaukee YMCA needed to be saved."
The YMCA filed for Chapter 11 bankruptcy protection in June, mired in $29 million in debt acquired over the years to expand and improve its facilities.
As part of its reorganization, the YMCA shed eight of its 11 properties, including the charter school Young Leaders Academy and YMCAs in Greenfield, Cudahy, Menomonee Falls, Wauwatosa, Saukville.
The new YMCA now owns just three facilities: the Rite-Hite Family YMCA in Brown Deer; the John C. Cudahy YMCA on Swan Road on Milwaukee's far northwest side; and Camp Minikani in Richfield.
It will continue to operate three others in lease arrangements: downtown at the Shops of Grand Avenue mall; the Northside YMCA in the Lindsay Heights neighborhood; and Parklawn YMCA at 4340 N. 46th St.
Under the reorganization plan approved by Kelley on Friday, the YMCA retains its $7 million endowment.
It will pay $9.2 million to BMO Harris, which faced the greatest exposure among its lenders. In addition, the YMCA will transfer two properties — the South Shore branch and land in Franklin — to a trust controlled by the bank for future sale.
The Grand Avenue YMCA, on the fourth floor of the John Plankinton Building at 161 W. Wisconsin Ave., was to go into the trust initially. But the Y has entered into an agreement to sell it to Kendall Breunig of Franklin-based Sunset Investors, which owns other properties in the building, according to Breunig. Neither side would divulge the price until it is finalized on Wednesday.
A group of members from the South Shore YMCA wrote a letter asking Kelley to postpone Friday's hearing while they try to find a buyer for that branch.
Attorneys for the YMCA said the delay would jeopardize the deal brokered with lenders and creditors and hinder the reorganized YMCA's fundraising efforts.
Tolan said the YMCA had tried unsuccessfully to find a buyer for the Cudahy branch, which closes on Saturday. She said it was not economically feasible for the YMCA to retain the facility because it was only marginally profitable, had declining membership and would have required more than $2 million in deferred maintenance.
Kelley approved the sale of the Greenfield, Menomonee Falls, Wauwatosa and Saukville YMCAs in October for $9 million. Young Leaders Academy sold for $5.6 million in July.
None of the YMCA's creditors objected to the plan, which will pay all creditors — other than the lenders — 90% or more of what they are owed.
Kelley, who also oversees the now 4-year-old Archdiocese of Milwaukee bankruptcy, acknowledged the speed with which the YMCA emerged from its Chapter 11.
"Congratulations," Kelley told the attorneys representing all parties. "It was a very, very excellent job counsel did in this case."
