A Wisconsin judge last week approved the sale of defunct cruise excursion seller ShoreTrips for less than a third of the $6 million it owes in customer refunds and other debts. But he extended for a month the window under which jilted customers can seek at least partial reimbursements.
The court-appointed receiver overseeing the case said "it's way too soon to estimate what the distribution to unsecured creditors will be" once the sale of the company's assets to Hornblower Group, the parent of American Queen Steamboat Company and Victory Cruises, for $1.8 million is complete.
But court filings indicate that after $365,000 in secured debts and other guaranteed payments are settled, there will be just a little over $1.4 million to divvy up between customers who are owed $4.7 million in refunds and other unsecured creditors who are owed just under $1 million.
That means if everyone listed as being owed money by the company filed a claim, they would get less than 25 cents on every dollar owed. If only half filed, that could increase to about 50 cents on the dollar.
How much is ultimately in the distribution pot also depends on who files a formal claim with the court, how many of those are approved for payment and how much is deducted to pay the receiver, who is managing the sales and distributions.
Claims in the case, No. 20-CV-6868, must be filed by March 30.
Forms are available here and must be submitted to:
Honorable Timothy Witkowiak
Milwaukee County Courthouse
901 N. 9th Street, Room 415
Milwaukee, WI 53233
It was also unclear if travel advisors' claims for commissions owed on booked excursions would be approved; commissions generally aren't paid until a trip is completed.
Asked about whether commission claims would be considered, receiver Seth Dizard said the figures and creditors cited in court documents "are based upon the company's books and records.
"As these cases go, receivers and trustees don't begin the claims review process until all assets have been recovered, so I haven't delved into them yet," he said.
During the Feb. 23 Zoom hearing on the sale, travel advisor Jason Webb of Mosaic Travel Design in Valencia, Calif., told the court he was "disappointed that all the big fish will get their money ... and all the consumers will not."
He also questioned where the money went, and why it wasn't held in trust.
But both the judge and the receiver said the ultimate payout will likely exceed the norm for such cases. And the purchase price, reached after 22 rounds of bidding, is five times that of the original offer of $375,000 made by an unnamed Florida company.
Dizard, the receiver, told the court the balance should be enough to pay a "substantial percentage of ... unsecured claims, which in receivership is considered a favorable outcome."
"Unfortunately, the company's assets were not of sufficient value to pay all these creditor claims," Dizard told the court. "But the market has spoken, your honor."
Dizard said the sale process was "reasonable and yielded fair results, or a fair representation of the company's assets.
"We are talking about a business that was shut down and relied exclusively on international travel, which has been shut down for roughly a year now."
In approving the sale, Milwaukee County circuit court judge Timothy Witkowiak said "that as a judge for 18 years, I don't think I've seen this kind of return to unsecured creditors. You just don't see it that often."
Travel agent Webb's concerns about the sale and where the money went "do not fall on deaf ears," Dizard said. Once the sale is complete, he said, he will turn his attention to investigating the history of the business and "whether there are any other avenues of recovery."
ShoreTrips, which was one of the leading sellers of independent, commissionable cruise excursions, filed for protection from creditors in November in what is a Wisconsin state alternative to federal bankruptcy protection.
According to court filings, ShoreTrips had just $100,000 in cash, with debts exceeding $6 million. Liabilities include $4.76 million in customer deposits and payments, $974,324 in accounts payable and $345,000 in long-term, secured debt.
The secured debt is held by Bank of the West, the company's landlord and the Small Business Administration.
The sale also calls for a $20,000 "break up" fee to the company whose initial bid was accepted, with the stipulation that the sale would then go out to bid.
In filing for receivership in November, company founder Barry Karp blamed the pandemic for the company's trouble and said he and his wife, Julie, had sought voluntary receivership in hopes of being able to resume operations with new owners.
"As we begin our restart process, and with the recent positive news of a vaccine underway, we anticipate returning for the 2021 cruise season in a position to better serve the industry and cruise-goers around the world," Karp said in a statement in December.
Neither the Karps nor Hornblower immediately responded to requests for comment about the sale or how the company's assets would be used going forward.
But the court order said "the buyer is not a successor to ShoreTrips or the Receiver. The sale does not constitute a consolidation, merger or de facto merger of ShoreTrips and the Buyer or the Receiver and the Buyer. The Buyer is not a mere continuation of ShoreTrips or the Receiver."
The order did say, however, that the offer "consists of a promise to offer employment to substantially all who were employed by ShoreTrips at the time this receivership action was commenced."