To help one Brooklyn private school recover after filing a Chapter 11 bankruptcy, bridge lender Titan Capital ID recently lent $8.8 million in exit financing to the struggling academy.
According to the Commercial Observer, the Westport, CT-based Titan Capital had agreed to lend the money to Adelphi Academy, which has been a preparatory school since 1863, before the school’s June bankruptcy filing. The funds will allow Adelphi Academy to continue its normal operations as it puts its finances back into order.
Adelphi Academy’s bankruptcy had been fueled by decreasing enrollment numbers and the foreclosure of its previous lender, Metropolitan Commercial Bank, to which the school had owed $6.2 million, the Commercial Observer reports.
In a Chapter 11 bankruptcy, a business or other organization typically seeks to reorganize its debts into a manageable repayment plan that is paid back over the course of a few years.
“Every small business in chapter 11 dreams of some ‘white knight’ riding in to rescue them, I would say it is very unusual, because of the obvious risk that a company with financial woes is probably going to have a hard time going forward in turning things around,” says Charles Huber of the Law Office of Charles Huber. “Somebody on the debtor’s side did a good job of instilling confidence in the mind of this lender.”
Titan Capital typically provides one- to two-year loans, and the money it lent to Adelphi Academy will be spent on the school’s defaulted debt and its payroll for the current academic year.
Adelphi Academy’s Chapter 11 bankruptcy isn’t the only legal issue plaguing the school — according to the Commercial Observer, the school is still resolving a $28 million lawsuit filed in 2012 by the parents of a student who claimed a school administrator “roughed up” their son. The school filed a $10 million defamation lawsuit in response.