Colorado Springs-based investment company ASI Capital and its ASI Capital Income Fund have sought protection from creditors amid significant revenue declines triggered by the COVID-19 pandemic.
The Convergence Group, a Puerto Rico company with administrative offices in Colorado Springs that manages ASI and its affiliated fund, filed a petition in Denver on Sunday under Chapter 11 of the federal bankruptcy laws. ASI and the fund each listed assets and liabilities owed to creditors. ASI had assets of $57 million and liabilities of $48 million at year’s end. Both entities must file restructuring plans with the court by Oct. 13.
ASI said in a news release that it “recently suffered significant setbacks in its ability to generate revenue due to the unprecedented nature of the government’s economic shutdown to slow the spread of the COVID-19 virus.” Convergence CEO C. Ryan Dunham said in the release that the company’s “business was solid and we were looking forward to a good year” before the pandemic hit the state in mid-March.
The 8-year-old investment company and fund offer investors a fixed yield of income from investments in hospitality, commercial real estate, apartments and private credit in Colorado, Texas and Chicago. ASI said in the release that it had planned to sell some assets and refinance debt on some assets in April, but those plans “came to a screeching halt in mid-March.” Dunham said before the pandemic hit, the company had never missed an interest payment on its five-year notes and 10-year bonds or refused to let investors cash out early.
After governments imposed stay-at-home orders, occupancy in the company’s three hotels in El Paso, Texas, fell to 5% and has recovered only to about 40%, the release said. ASI’s investments in apartment complexes were hurt by tenants losing jobs and not paying rent or renewing leases.
Commercial real estate investments held by the company have been hurt by many businesses sending employees home to work, prompting those tenants to stop paying rent or renewing leases.
The filing, the release said, will give ASI and the fund “time for business to normalize and resume producing income,” so the company can “return to business as usual, reorganize with a new plan or proceed with an orderly wind down.” Dunham said none of the properties or businesses ASI owns will be affected by the Chapter 11 filing.
ASI’s statement didn’t indicate which option was most likely but said the goal “is to protect the value of the company and be able to maximize payments to creditors (including noteholders and bondholders) as well as trying to preserve the members’ equity.” Dunham said he couldn’t estimate how much investors might recover; it depends, he said, on how fast the U.S. economy recovers and what sort of additional relief the federal government provides.
ASI’s investments include a $5.5 million loan to Colorado Springs-based PeakMed, which charges patients a monthly fee for basic medical care instead of paying for insurance coverage for those services.
The 2017 loan was to fund expansion of the practice and included an ownership stake. PeakMed founder and CEO Dr. Mark Tomasulo said the filing would not have any impact on PeakMed.
ASI agreed in 2017 to a settlement with the Colorado Division of Securities to stop selling unregistered promissory notes and pay the agency $300,000 for alleged selling more than $12.5 million in unregistered notes to 130 investors.