Nine Hill Restaurants Exit Bankruptcy

Barracks Row Entertainment Settles with Its Sellers

On March 3, 2015, The US Bankruptcy Court for the District of Columbia granted a motion filed by owners of Barracks Row Entertainment LLC (BRE) requesting that their bankruptcy filing be dismissed. BRE is a Delaware-based corporation that owns the Hawk'n'Dove, Molly Malone's, The Park Tavern, Willie's Brew & Cue, Senart's Oyster House, The Chesapeake Room, Pacifico, The Boxcar and Lola's. The BRE had sought bankruptcy protection in March 2013.

Under 'Chapter 11,' debtors have the absolute right to request a dismissal of their bankruptcy filing. In such cases, the debtor files a motion with the court arguing in effect that the creditors will be better off if the debtors were not operating under the restrictions of bankruptcy. The debtors also usually agree not to again seek bankruptcy protection, stated a local bankruptcy expert.

In this case, the current owners financed their purchase of the restaurants in part with three notes held by the sellers: Andrea Gentile, Xavier Cervera and William A. Sport. The notes were secured with the corporate stock of limited liability companies that held each restaurant individually, as well as the leases and liquor licenses for each establishment. Payments totaling roughly $1.8 million per year were due the major creditors, according to the bankruptcy documents.

BRE filed for bankruptcy in part to avoid payment to the sellers. The court entered an order granting their motion on April 2, 2013. Both the sellers and BRE disagreed on the validity of the seller financing. Both parties engaged in extensive discovery. One of the sellers also sued BRE's investors independently of the bankruptcy proceeding.

After exhaustive negotiations, the sellers and BRE have reached an agreement that “resolves all disputes relating to the Seller Financing and the Seller Litigation,” according to the filing. This settlement also provides for new terms for the debt owed by BRE to National Capital Bank, third largest creditor. The exact terms of the agreement are not publicly available.

The parties have “determined that resolving their disputes consensually and working together to maximize sales and value for the Debtor's restaurants, outweigh the potential risks and certain additional expense of litigating their disputes,” the order stated.