JT Exclusive: Clayworks Letter Details Bankruptcy Options

(Photo by David Stuck)

A letter Baltimore Clayworks officials sent to a community group on Tuesday outlines the various scenarios the ceramics nonprofit faces now that a deal to buy its Mount Washington properties has been nixed.

Attorneys for Clayworks concluded the organization faces foreclosure or Chapter 7 or Chapter 11 bankruptcy, according to the letter obtained by the JT that was sent to Clayworks Community Campaign, which has been advocating for Clayworks to remain where it is.

The letter states Clayworks was left with the options after nonprofit Itineris, which assists adults with autism, pulled out of a $3.7 million deal to purchase Clayworks’ two properties on Smith Avenue and it was determined the organization has “liquid assets at near zero.” The sale would have wiped Clayworks of about $1.3 million of debt.

The JT first reported on Monday that the sale to Itineris was off.

A source who provided the JT with the letter and spoke anonymously because of the sensitivities surrounding the situation said operations could continue through at least the summer in a Chapter 11 bankruptcy. Chapter 7 bankruptcy or foreclosure would both cause Clayworks to shut down.

Under a Chapter 11 bankruptcy reorganization, a bridge loan or cash infusion would be needed to fund summer camps and classes and pay staff, artists, teachers and creditors, the letter noted.

The source called on Clayworks Community Campaign, which started shortly after the board of Clayworks announced in February a plan to sell its assets, to make that happen. The group has raised about $200,000 through a grassroots effort to help resolve the debt issue at Clayworks.

Marsha Smelkinson, a spokeswoman for Clayworks Community Campaign, said representatives for her group “have discussed the issues directly” with Clayworks board members and look forward to continuing that dialogue.

The group faces a 5 p.m. deadline on Thursday, the source said.

A caveat of such an arrangement indicated that the Clayworks board would “not accept any funding should it come with contingencies or demands in any form.” That would include changes to the Clayworks board, a review of financial statements and restrictions on the sale of its properties, among others. In addition, Clayworks would continue its efforts to sell one or both of its buildings to help restructure operations.

If Clayworks does not receive the cash infusion, the source said the organization would dissolve in the not-too-distant future.

“Essentially, the Steering Committee [Clayworks Community Campaign] has an opportunity to ‘Save Clayworks,’” the letter stated.

jsilberman@midatlanticmedia.com

This story was updated Friday morning to reflect Marsha Smelkinson’s comments.

Comments

  1. Marcy Emmer says

    I know hindsight is 20/20. I am just troubled with how Mr Powell could say he wants to do the responsible thing for Clayworks. Was it responsible to reject help in February from a respected corporate restructuring attorney. He was willing to do this pro bono and he was told no thank you. Of course he thought he should talk to the entire board. Also the attorney would have liked to address the board with the community. But sadly he was told not needed. Why? Why was that not the responsible action to take? What better plan was there?
    I wonder if Baltimore Clayworks would have been saved back in February. I’m not sure of Mr Powell’s role then? I’m sure it was filled with responsibility. I mean he had been at Clayworks at least 6 months.
    I know hind sight is 20/20. So much has happened. If only…

  2. Ted Mathias says

    The majority of people involved with Clayworks wants it to stay in Mt Washington. They have provided support in the past, but the current board has driven them away. Why won’t the Board of Trustees put the gallery building and parking lot on the market and keep the studio building. Isn’t that better than the extreme of bankruptcy? There have been offers for the gallery building in the recent past.

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