Heart of the Valley YMCA looks to keep operating while facing $15.5M mortgage debt

HUNTSVILLE, Ala. (WHNT) — The Heart of the Valley YMCA made the surprise announcement last week that it was filing for bankruptcy protection.

In a statement, the YMCA’s leadership said its operations would continue, but plenty of questions remain.

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The Heart of the Valley YMCA operates the Downtown, South Huntsville and Madison YMCAs. They offer an array of popular programs and services ranging from Pre-K and after-school programs to youth sports, fitness and even senior balance classes.

So how does a Chapter 11 bankruptcy filing happen?

Jeff Collen, interim CEO for Heart of the Valley YMCA, told News 19 the issue is debt, not operations.

“This Chapter 11 filing is really not about cash and operations,” he said. “The Y is operating very, very well. our issue comes to being able to make the large mortgage payments. We had a note due, $15.5 million note due early last week, and the Y’s not able to come up with $15.5 million.”

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The money is owed to Redstone Federal Credit Union, which in 2009 provided the loan to build the Hogan Family YMCA in Madison.

“Fifteen years ago, who else would have given a $4 million operation, a $19.5 million loan? But without that, this facility that we’re in would have never been built,” Collen said. “And it helped with some of the costs from an earlier remodel of, the Southeast facility. and the Y has been paying that, through the years so that it’s now down to $15.5.

But the pandemic reduced the Y’s members, Collen said. From 2019 to today about $1.8 million in membership revenue has gone away. Federal COVID money helped up to now, Collen said, but that money’s been spent.

Collen said that means for now the Y’s roughly $1 million annual mortgage payment is no longer possible.

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Collen said Redstone Federal Credit Union has been a good partner for the YMCA. But court bankruptcy records show that the relationship hit a rough patch. Collen said Heart of the Valley was in talks with Redstone trying to find a financial solution that allowed them to keep operating, but that didn’t happen.

“Those talks just broke down, and all of a sudden our accounts were frozen,” Collen said.”

That was on Aug. 21 and meant no immediate money for operations, including some payroll. In court records the YMCA also says that a $20,000 check Heart of Valley sent to Huntsville Utilities for rent for the Downtown Y effectively bounced.

So, on Aug. 23, the YMCA filed for Chapter 11 protection, which asks a court to supervise a financial reorganization by the petition and can provide time to renegotiate the debt.

“The accounts were frozen and we had really no choice but to file Chapter 11 in order to protect the employees, in order to protect the members, in order to protect all of those youth program participants, to protect, you know, all of the youth and our child care, and the families that need us for that, Collen said.

They were in federal bankruptcy court Wednesday. The operating account was unfrozen and the YMCA was given a Sept. 16 hearing deadline to develop a budget and related plans.

For its part, Redstone Federal Credit Union says it hopes to reach an agreement.

“Redstone Federal Credit Union looks forward to working with the YMCA through this process and hopes to reach a positive outcome for all parties involved,” said Michael Rodgers, Redstone’s General Counsel & Chief Compliance Officer.

Collen said the YMCA has been encouraged by the public response since it announced the Chapter 11 filing.

“We have heard so many positive things, that people appreciate what we do,” he said. “And you know, ‘they’re here with us.’ We’ve had a lot of people step and say, ‘We want to help.’”

Collen said they won’t pull back on programs, will look to build numbers and review how they operate and could make a push for more community support — through a knock-down-the-debt campaign.

That campaign goal may be ambitious, but Collen said it will take a significant fundraising effort to affect the current debt level.

“We need it probably closer to $8 or $9 (million) to make it really, really manageable,” he said. “You know, we can operate very well with $4 to $5 million in debt, maybe a little more as we grow. But it’s very difficult with $15.5 million.”

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