McNally Smith auction nets nearly $1 million: St. Paul school’s bankruptcy creditors have $6.7M in claims
ST. PAUL — The bankruptcy estate for McNally Smith College of Music will have nearly $1 million to distribute to creditors following the sale of the downtown St. Paul building and music equipment.
A three-day auction of recording equipment, amplifiers, musical instruments and more brought in $909,175 last week, according to a preliminary report to the bankruptcy trustee.
The estate previously received another $60,000 for items in the college cafeteria and auditorium.
The for-profit college, which moved to St. Paul from Minneapolis in 2001, abruptly closed in December after years of declining enrollment and a failed attempt to convert to nonprofit status.
More than 200 unsecured creditors, including students who prepaid their spring tuition and employees who never received their final paychecks, have filed claims totaling $6.69 million.
Under bankruptcy law, unpaid employees get priority over other unsecured creditors.
Some of the sale proceeds will be used to pay those administering the bankruptcy and auction.
It remains to be seen whether the college's insurer will add to the pool of money available to creditors.
The sale of the building at 19 E. Exchange St. will cover all the secured debt, including the mortgage, a Small Business Administration loan and a few small mechanics' liens.
The buyer is Exchange Street Partners, a group of local investors who in February bought the $4.5 million mortgage at a discount from Bremer Bank.
The investors and bankruptcy trustee Patti Sullivan negotiated the rushed purchase, which will provide a guaranteed payout for unsecured creditors without forcing the investors to go through the foreclosure process.
At the urging of U.S. Bankruptcy Judge Katherine Constantine, Sullivan got back in touch with prospective buyers last week but none were willing to match the investors' offer.
Dan Beck, attorney for Exchange Street Partners, declined to comment about the investors' plans for the building.
The History Theatre, the building's lone tenant, has a lease expiring next week. General Manager Karen Mueller did not return a phone call Monday, but she said recently they're working on a lease extension and expect to be in the same space next year.