Circle seeks asset buyers

NEW YORK — Creditors of the defunct Circle in the Square said Monday they’ll solicit arts organizations to purchase the premises and assets of the dark Broadway theater, and pointedly noted that no group — specifically the former management of the theater — has an “inside track” on a deal.

Norman E. Rothstein, a court-approved business and financial consultant to the Circle’s official creditors committee, said the committee would not rule out any “viable and responsible party” from making a bid on the theater, but did question whether the former management team — producing director Gregory Mosher and exec producer M. Edgar Rosenblum — were indeed “viable” given the financial condition of the “insolvent” theater.

Mosher and Rosenblum resigned June 16 with the suspension of theater operations. Mosher has said he would consider participating in a reconstituted Circle.

Despite Rothstein’s open invitation to potential buyers, the creditors (including a variety of theatrical unions, vendors and administrative services) are less than happy these days with the Mosher-led management team. Rothstein himself called the management “reckless” in acquiring additional debt even after the Circle declared Chapter 11 bankruptcy last August. “They thought they could get money to bail them out,” Rothstein said, “so they incurred (more) debt.”

High debt

Rothstein estimated the Circle’s debt at nearly $4 million (and possibly more), significantly higher than the approximately $3.3 million that the previous management has discussed. Rothstein said that the Circle made approximately $700,000 from the popular three-month run of “Hughie” starring Al Pacino that ended last November, but by the time “Stanley” opened in February, the coffers were down to $400,000.

“Stanley,” which cost Circle about $600,000 to stage, did not earn back its production costs, Rothstein said.

Essentially the creditors claim that the Circle management was overly optimistic regarding both fundraising projections and potential income from an innovative subscription plan in which ticketbuyers paid a $37.50 membership fee and $10 for each show attended. “We were certain that their ability to raise funds after the bankruptcy were nil,” Rothstein said, “and that their (potential) earned income was overstated by a third. Our analyses and warnings were ignored.”

Neither Mosher nor Rosenblum could be reached for comment Monday evening.

Mosher and Rosenblum were hired by the struggling theater last fall after the bankruptcy had already been filed. Mosher, a former exec at the Lincoln Center Theater, and Rosenblum, formerly the exec director of New Haven’s Long Wharf Theater, were recruited by the board of directors to reinvigorate the venerable, but failing, theater.

Fiscal woes

The financial obstacles apparently proved insurmountable. The board suspended operations June 16 just prior to a meeting with the creditors and a bankruptcy judge. Mosher and Rosenblum resigned, with Mosher later saying that the resignations were intended to “force the issue” and allow the court to resolve the theater’s financial crisis.

Mosher recently told Daily Variety that the biggest impediment to fundraising was not last August’s bankruptcy, but a tax debt that goes back to the 1970s. With penalties, the debt now approaches $2 million, and Mosher said potential donors were reluctant to contribute until the tax issues were resolved.

But Theodore Mann, Circle co-founder and longtime artistic director who resigned prior to the theater’s bankruptcy last summer, rejects Mosher’s claim, noting that the theater has been disputing the tax claim since the 1970s. “It never interfered with our fundraising, nor was it a secret.” The debt stems from an IRS refund of “a couple hundred thousand dollars” that the Circle received in the late 1970s, a refund the IRS later claimed was a mistake. The theater had already spent the money, Mann said, and has been fighting the IRS on the refund revocation ever since.

Who gets paid what is now up to the bankruptcy court, and Rothstein said he hopes that a sale of the Circle’s premises and assets would yield at least $1.25 million. But, he adds, with the debt more than tripling that figure, “the creditors and the IRS would take major hits.”

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