Editor’s note: This story has been updated with comments from Max’s South Seas Hideaway owner Mark Sellers III. The story has also been clarified to show assets and liabilities of both Authentiki LLC and MSSH LLC.
GRAND RAPIDS — The operators of Max’s South Seas Hideaway — a downtown Grand Rapids tiki bar owned by former BarFly Ventures LLC President Mark Sellers III — have filed for Chapter 11 bankruptcy.
It’s the third set of bankruptcies associated with Sellers filed within the past five months as his current and former restaurants and bars accumulated debt following the pandemic-related shutdowns.
Authentiki LLC and its wholly owned subsidiary MSSH LLC each filed for Chapter 11 bankruptcy protection on Oct. 29 in the U.S. Bankruptcy Court in the Western District of Michigan. The separate cases are filed under Subchapter V of the U.S. Bankruptcy Code, which was passed by Congress last year to make it easier for small businesses to emerge from bankruptcy. Experts predict more filings under the Small Business Reorganization Act as the pandemic unfolds, as MiBiz reported this week.
“This is a protective move to prevent any of our creditors from coming after us,” Sellers said in an interview. “But we’re not going out of business. We’re staying open normal hours. No layoffs. No one will really notice.”
The filing notes “significant cost overruns in remodeling and preparing” Max’s South Seas Hideaway to open in October 2019. The bar and restaurant, located at 58 Ionia Ave. SW, closed in mid March because of the pandemic, which caused the restaurant operators to fall behind in payments to various creditors despite Authentiki receiving a $505,022 Paycheck Protection Program loan and a $149,900 Economic Disaster Injury Loan from the U.S. Small Business Administration, according to court filings.
“It’s pretty obvious what’s going on with the restaurant world right now,” Sellers said. “We had just opened a few months before the shutdown.”
Although Max’s started generating revenue again after reopening June 8 under 50 percent occupancy restrictions, it wasn’t enough to offset its debt. Combined, Authentiki and MHHS have nearly $2.63 million in estimated assets and nearly $3.04 million in estimated liabilities. Authentiki’s assets are just below $80,000 with $2.05 million in liabilities. MHHS’ liabilities are less than $990,000 while its assets are more than $2.5 million, including more than $2.1 million in furniture, fixtures, equipment and collectibles.
Authentiki’s top unsecured creditor is Levitation Holdings LLC’s Nathaniel Rich for $523,331 on a business loan plus interest. Other unsecured creditors include Chase Bank for the PPP loan, Warner Norcross & Judd ($18,537), Harper Associates ($17,795) and Corrigan Logistics ($17,774).
Secured creditors include Pawnee Leasing Corp. ($245,890.99), the SBA for the Economic Disaster Injury Loan and Grand Rapids-based Wolverine Building Group Inc. ($125,000).
In mid April, Wolverine Building Group — the main contractor on Max’s buildout — sued Authentiki and Sellers in Kent County Circuit Court alleging $400,000 in “unpaid obligations” associated with the restaurant’s remodeling.
MHHS’ top unsecured creditors include Gordon Food Service ($96,219), the city of Grand Rapids ($45,829) for real and personal property taxes and Greenwood Studios ($35,939). Its top secured creditors include Ionia Retail LLC ($580,203), Amur Equipment Finance Inc. ($45,201) and Lease Corp. LLC ($31,219).
Max’s South Seas Hideaway is known for its elaborate tiki-themed decor and menu. The owners plan to keep the restaurant operating through the bankruptcy process.
“This filing was really done to ensure our survival by putting our creditors at bay and giving us time to repay them,” Sellers said.
The Authentiki and MSSH bankruptcy filings come after Sellers filed for bankruptcy personally in August. He said the business and personal bankruptcy filings are “all related.” Meanwhile, Sellers’ BarFly Ventures — which owned the HopCat chains, Stella’s Lounge and Grand Rapids Brewing Co. — emerged from bankruptcy this week after an investment group purchased the company’s assets for $17.5 million.
Sellers indicated in an affidavit that he only started taking a salary from Authentiki on Oct. 12 after being “recently terminated from my position with Barfly Ventures, LLC due to that company’s sale to a new owner,” according to the filings.
Sellers told MiBiz he’ll “play no role whatsoever” with HopCat going forward.
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