Divine Dining Group wants to sell a trio of its South Strand restaurants, claiming the businesses will have to shut down within weeks if a sale is not approved, but a lawyer representing Myrtle Beach dentist Wade Nichols says the sale is a ruse designed to cheat his client out of his $8.6 million loan to the restaurant group.
Columbia lawyer Rick Mendoza, who represents Divine Dining, told state Judge Steven John during a court hearing Monday that the restaurants – Bovine’s and Divine Fish House, both located in Murrells Inlet, and Bubba’s Fish Shack in Surfside Beach – only have about two weeks’ worth of operating cash left before they would have to close, putting as many as 175 people out of work. Those are the only three Divine Dining Group restaurants involved in the proposed sale.
The restaurants are in receivership as part of a lawsuit Nichols filed nearly two years ago, claiming Divine Dining owner Jack Divine IV failed to repay a multimillion dollar loan Nichols made to him in 2007 to help Divine Dining open new sites at the Market Common project in Myrtle Beach. Nichols obtained a judgment last year against Divine for $8.6 million but has been unable to collect any money.
Mendoza told John during a court hearing that he wanted clarification of the receivership order to make sure Divine Dining could legally sell the three restaurants and the real estate on which two – Bovine’s and Divine Fish House – are located. Mendoza said a local group called Inlet Operating Co. LLC wants to buy the restaurants by paying off $4.8 million owed to CresCom Bank and making about $2 million in additional investments.
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Inlet Operating Co. is comprised of Lloyd Coppedge, the president and chief executive of Conway-based Wolverine Brass, and members of the Brittain family, who also own the Myrtle Beach National Group’s nine golf courses as well as several area hotels and restaurants. Coppedge, whose company manufactures plumbing products, attended Monday’s court hearing with Clay Brittain III.
John refused to rule on the matter Monday, saying he did not want to tell Divine Dining how to operate its business. However, John warned that any transaction that violates the court’s previous receivership order could create further legal problems for Divine Dining.
Surfside Beach lawyer Gene Connell said the proposed sale “would put a lot of money in someone’s pocket, and it’s not Dr. Nichols’.”
Connell said the proposed sale is an attempt to move the restaurant and real estate assets into a third party’s name so Nichols cannot share in their profits. He said a recent appraisal puts the value of the three restaurants and their real estate at between $7 million to $8 million.
“They want to transfer the restaurants to another company and poor old Dr. Nichols has an $8.6 million judgment against nothing,” Connell said during Monday’s court hearing.
Most of the money Nichols gave to Divine came from a pension plan the dentist had set up for himself. Divine has said the money Nichols gave him was an equity investment in the restaurants and not a loan that must be repaid.
“There is no value to that equity investment now,” Mendoza said, referring to the $8.6 million Nichols gave to Divine. “There may be in two years, but we won’t be around two years from now without being able to sell.”
Connell said the Murrells Inlet and Surfside Beach restaurants should be sold on the open market to get maximum value, and Arlene Jaskot – the court-appointed receiver – recommended selling the restaurants separately instead of as a group to get more money. Jaskot said she is opposed to the proposed sale to Inlet Operation Co., a corporation that was formed on Dec. 13, according to S.C. Secretary of State records.
Mendoza, however, said time is running out for the restaurants as they enter the slowest part of this area’s winter offseason.
“The revenues of the restaurants are not, and will not be for months, sufficient to sustain their continued operation,” Mendoza said in court documents filed in preparation for Monday’s hearing. “At risk are the jobs of 175 people. If the restaurants do not obtain the working capital needed to sustain them, they will be forced to close and the employees will suffer the loss of their jobs.”
Mendoza did not say how much money the restaurants need to continue operating through the winter.
Myrtle Beach lawyer Clay Brittain III, who represents Inlet Operating Co., said that group is willing to immediately invest $1 million in cash for operating expenses and another $1 million for capital improvements if a sale is approved. The restaurants would operate under new management but would hire Divine as a paid consultant.
CresCom Bank also has indicated it is willing to make a working capital loan to the restaurants to get them through the offseason, Mendoza said, “but questions exist about whether that is allowed given the receivership.”
Myrtle Beach lawyer Henrietta Golding, who represents CresCom Bank, told John that the bank “is open to listening to the [sale] proposal.”
Mendoza said the Murrells Inlet and Surfside Beach restaurants have been able to get loans in past years to get them through the offseason but the receivership status put any loans this year in doubt. In addition to the job losses, Mendoza said the closed restaurants would deteriorate and CresCom Bank and other creditors might not get paid.
John said Divine Dining essentially was asking for his blessing on the sale, something he is not willing to provide. John said it is up to Divine Dining to do what it thinks is best and possibly suffer any legal consequences as a result of its decisions. John said he would be willing to schedule a hearing where detailed terms of the sale, the restaurants’ finances, expert testimony and any opposition to the deal would be discussed in open court, but short of that he would not modify the receivership order.
In addition to the three restaurants involved in the proposed sale, Divine Dining Group operates Divine Prime and Nacho Hippo at the Market Common development, several Ultimate California Pizza and River City Café locations along the Grand Strand and Pawleys Raw Bar in Pawleys Island.