Topeka Y files bankruptcy as others fight to survive
The YMCA of Topeka, Kansas, is seeking to reorganize under Chapter 11 bankruptcy as others across the country try to survive with skeleton crews amid the coronavirus pandemic.
The Topeka Y owes $5.26 million to bondholders represented by trustee CoreFirst Bank & Trust, according to the May 21 chapter 11 filing. The 2011 industrial revenue bonds were issued through the city of Topeka, which collects lease payments for the facility.
Those bonds refunded a 2000 issue used to refurbish a 38,000 square-foot facility.
The nonprofit faced economic hardships before the coronavirus closed facilities, and was seeking to refinance its debt, according to a letter from attorneys at the Hinkle law firm.
The YMCA’s revenues fell 50% in 2019 to $2.39 million, per the letter.
“This fact has been caused by increased competition from for-profit exercise and gym facilities, together with the sale and sharing of facilities owned by the Topeka Y,” the letter explained.
After the sale of three locations in 2017 and 2018, the Topeka Y has only one facility in the southwest section of the city. That facility, appraised at $1.65 million, needs repairs to its roof and swimming pool, according to the April 14 letter from attorney Patrick Riordan to associates in Wichita.
Numerous YMCAs across the country are facing unprecedented economic hardships a decade after they began recovering from the 2008 global financial crisis.
The 15,000-member Lancaster Family YMCA in Pennsylvania has said it may face permanent closure if it is unable to raise funds to pay its $5.6 million debt. A planned merger with the Y in Greater Brandywine was put on hold when the pandemic hit.
On Wednesday, June 3, the YMCA of Greater Twin Cities in Minnesota was downgraded by Moody’s Investor Service rating to Baa1 from A3, and given a negative outlook.
“The negative outlook reflects the possibility that the YMCA’s operating performance could be negatively affected over a multi-year period due to the coronavirus and knock-on effects,” analysts said. “A prolonged period of low revenues with greater than anticipated draws on reserves and inability to meet financial covenants would result in further credit deterioration. Should recent unrest in Minneapolis result in damage to the YGTC’s facilities, it could compromise its ability to re-open some of its activities.”
The Twin Cities Y, created by the merger of YMCAs in Minneapolis and St. Paul, carries YGTC's total adjusted debt of $64 million, including a $9.4 million new market tax credit expected to unwind in 2022, per Moody’s. The remainder of the debt is fixed rate, either bonds or capital leases.
On May 18, Moody’s downgraded the YMCA of Greater New York to Baa2 from Baa1 and retained a negative outlook. That affected $130 million of rated debt.
Congress approved $60 billion of support for nonprofits including YMCAs as part of the coronavirus relief package, but the organizations around the country are still facing extreme economic pressure.
“We are doing what we can right now, and we are committed to being here for communities as our country begins the tough work of recovery,” said Kevin Washington, president of YMCA of the USA. “However, like other nonprofit organizations, we will need significant support from the federal government to sustain our operations and care for our staff until that time comes. We can't do this alone."