EBaum's bankruptcy faces new challenges

Will Astor//February 22, 2013//

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EBaum’s Webster Ventures LLC’s attempt to reorganize under court protection has broken down.

The U.S. Trustee’s Office plans to ask the Bankruptcy Court this month to convert the firm’s Chapter 11 reorganization to Chapter 7 liquidation or to dismiss the case, a court filing states.

The firm likely will move to drop the bankruptcy case, which has outlived its original purpose of forestalling a bank foreclosure, but he will fight to retain ownership of the project’s properties, said Neil Bauman, the Webster development’s manager.

"We’re going to go down swinging," Bauman said.

The Main Street redevelopment project in the village of Webster asked for court protection in April 2012. The filing halted a state court foreclosure proceeding begun by Genesee Regional Bank the previous December.

The bank holds a $3.25 million mortgage on the Webster project’s four properties. It had planned last October to argue in court for an order lifting the automatic stay that the bankruptcy filing put on the foreclosure. Instead, it cut an 11th-hour deal with EBaum’s Webster Ventures, agreeing to put off a foreclosure temporarily.

Bauman and his son Eric, the LLC’s nominal head, planned to remake Webster’s downtown, filling a strip of the village’s main drag with shops and eateries similar to the village of Pittsford’s Schoen Place. In the foreclosure action, the bank seeks to take over the buildings, which the Baumans started renovating in 2007.

The strip houses a pub and sandwich shop, an Off-Track Betting Corp. facility and an upscale steak house the Baumans started and ran until selling it to restaurateur Stergios Kotorlis last year.

In an interview last October, Neil Bauman said he was not sure he could meet Genesee Regional Bank’s April 1 accelerated deadline for paying off the $3.25 million loan. To satisfy the debt, he would have to refinance the loan or sign a $5,000-a-month tenant, and he was not sure of being able to accomplish either, Bauman said.

In a letter filed with the Bankruptcy Court in January, Genesee Regional Bank attorney John McAndrew of Woods Oviatt Gilman LLP stated that eBaum’s Webster Ventures had not lived up to terms agreed on in October, putting the loan into default.

The LLC failed to complete a sale of a property, failed to make a promised $100,000 payment to the bank in December and was late with a $19,000 loan payment in January, McAndrew’s letter states. The default automatically would reactivate the foreclosure as of Jan. 15, he added.

The LLC also failed to file monthly operating reports, did not pay property taxes and had not provided proof of liability insurance, the U.S. Trustee’s Office states in a January motion asking the Bankruptcy Court to either convert the bankruptcy case to Chapter 7 or throw it out.

The Baumans embarked on the Webster project after the 2007 sale of eBaum’s World Inc., a comedy website Eric Bauman had started some nine years earlier as a high school student. The Internet venture, which at the time employed 30 people and was pulling in pretax net income of $1.6 million, was sold to San Francisco-based HandHeld Entertainment Inc. for $17.5 million, $15 million of which, Neal Bauman said, was in cash.

The eBaum’s World site is active, but the Baumans have been out of the picture since they parted ways with Zvue Corp., a successor company to HandHeld.

"They fired us and came into Brighton and took away all the assets," Bauman said. "There were over 20 people working there."

Legal disputes with Zvue continued over additional payments totaling some $32 million that he and his son believed they were owed, but no additional payments were ever forthcoming, Bauman added.

Zvue was delisted by Nasdaq in 2009 for failing to hold an annual meeting and trading under $1 a share, Securities and Exchange Commission records show.

Genesee Regional Bank’s foreclosure of the eBaum’s Webster Ventures properties restarted in January after the loan went into default. As a result, the properties went into receivership.

The receiver is collecting rents from tenants there, Bauman said. Tenants paying the receiver include Bauman and his son, who must now pay rent for an office they maintain in the development to run a T-shirt company and other real estate interests.

Bauman still hopes to regain control of the project and will continue to seek private financing to pay off the bank loan, he said.

"I don’t know what the bank intends to do," Bauman said. "Depending on who you talk to, the properties are appraised for between $2.6 million and $3.2 million, and until they sell it in a foreclosure auction, it’s still ours."