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Riverhounds file for bankruptcy protection

| Thursday, March 27, 2014, 11:03 a.m.
Jhonny Arteaga crosses the ball late during the second half of the Riverhounds game against the Los Angeles Blues on July 6, 2013.
Conor Ralph | Tribune-Review
Jhonny Arteaga crosses the ball late during the second half of the Riverhounds game against the Los Angeles Blues on July 6, 2013.
The Pittsburgh Riverhounds and Harrisburg City Islanders battle during the inaugural game Saturday, April 13, 2013, at Highmark Stadium.
Christopher Horner | Tribune-Review
The Pittsburgh Riverhounds and Harrisburg City Islanders battle during the inaugural game Saturday, April 13, 2013, at Highmark Stadium.
Riverhounds' defender Nikola Katic makes his way up the field against Antigua Barracuda FC on Sunday, June 23, 2013, at Highmark Stadium.
Stephanie Strasburg | Tribune-Review
Riverhounds' defender Nikola Katic makes his way up the field against Antigua Barracuda FC on Sunday, June 23, 2013, at Highmark Stadium.

Owners of the Pittsburgh Riverhounds professional soccer team and Highmark Stadium in the South Side filed this week for Chapter 11 bankruptcy protection, blaming stadium construction debt that ballooned over its budget.

The filing will not diminish the Riverhounds' schedule, an affiliated community soccer academy or other daily operations for the otherwise-healthy team, executives said.

The owners need to reorganize and alleviate their debt to keep the organization growing and make the city an attractive potential home for Major League Soccer teams, they added.

“To put the company in a position where that can be considered, we have to right the ship and make sure we have a model that can work long-term,” said Riverhounds CEO Jason Kutney. “We want to break free of these shackles that have held this company hostage the last few months and restructure debt to the point that we can fully engage these (growth) models.”

One of two ownership groups, Riverhounds Acquisition Group LP, has between 50 and 99 creditors, $1 million to $10 million in liabilities, and between $500,000 and $1 million in assets, according to court filings. The other, Riverhounds Event Center LP, lists 50 to 99 creditors, $10 million to $50 million in liabilities, and $1 million to $10 million in assets.

The voluntary filing under Chapter 11 could allow the owners to reduce their overall debt and emerge stronger, which is the goal of the process, said bankruptcy expert David Duffus.

“Coming out on the back end, it ought to have some breathing room,” said Duffus, a partner in forensic litigation and evaluation services at ParenteBeard, Downtown. He called construction-related burdens “a very common problem.”

Riverhounds and stadium majority owner Terrance C. “Tuffy” Shallenberger could not be reached for comment. In a prepared statement, he called the bankruptcy filing necessary “to ensure the long-term viability of the companies.”

Shallenberger became majority stakeholder in the team and stadium last year to help strengthen the operations, Kutney said. The ownership groups owe Connellsville-based Shallenberger Enterprises and Shallenberger Construction Inc. more than $100,000, the bankruptcy filing shows.

Neither an attorney representing Shallenberger nor Kutney would identify other stakeholders in the controlling partnerships.

Kutney said problems arose from construction of the 4,000-seat stadium in 2012. To make sure it would open for the 2013 season, contractors sped up work and rang up charges not included in the $10.6 million budget, he said.

He did not know by how much the final costs outpaced the budget. But the end result is a heavier debt that “accelerated beyond the capacity of the operations,” Kutney said.

It isn't clear how long the private companies might remain under bankruptcy protection, he said.

Formed in 1999, the Riverhounds will begin their 2014 season on Saturday in Orlando, Fla., according to the team. The first home game is set for April 12 at Highmark Stadium, where average attendance last year exceeded 3,000 people per game. The team plays in the third tier of the American Soccer Pyramid.

The affiliated Riverhounds Academy training programs, which attract about 1,250 families, will not cut back because of the bankruptcy, Kutney said. Nor will the team's summer camps, which enroll about 1,000 youths.

The companies plan no layoffs among roughly 20 full-time employees for the Riverhounds and stadium.

Shallenberger will provide interim financing to keep the team and stadium running, the companies said.

“We want our employees, fans and sponsors to know that our commitment to growing the game of soccer and to realizing the full potential of Highmark Stadium will continue during the reorganization process,” he said in the statement.

Adam Smeltz is a Trib Total Media staff writer. Reach him at 412-380-5676 or asmeltz@tribweb.com. Staff writer David Conti contributed to this report.

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