In 11th-hour move to save restaurant, Rotelli files bankruptcy, avoids auction

Rotelli restaurant along Calder Way in State College.
Rotelli restaurant along Calder Way in State College. CDT file photo

Rotelli employees bustled Thursday morning to get ready for another day of work.

But the restaurant almost didn’t open.

PNC Bank, with which the downtown State College restaurant fell behind on payments, filed a writ of execution and nearly held an auction at 10 a.m. at the eatery. Rotelli co-owners David Krauth and Mike Hughes filed for Chapter 11 bankruptcy at the last minute to avoid going out of business.

William F. Comly and Son and Centre County sheriff’s Sgt. Bryan Sampsel were prepared to auction off the Rotelli liquor license and equipment when the bankruptcy filing came through at 9:45 a.m. The filing sent 10 would-be bidders away empty-handed.

Krauth said bankruptcy was the only option left to keep the restaurant running.

“We’re in a continued negotiation with the bank as our only creditor, so we’re attempting to negotiate with them,” Krauth said. “We thought we had a deal with PNC worked out. They put parameters out, and we agreed to their parameters. We had an investor possibility that agreed to their parameters, and at the 11th hour the bank pulled out of the deal.”

Krauth declined to identify the potential investor.

Jill Spott, PNC Bank’s attorney, placed the total liability against Rotelli at about $1 million plus interest in May 2009 in an initial filing by the bank against the restaurant. Spott filed a writ of execution Jan. 16 against Rotelli for the fourth time since 2009.

Rotelli took out a $918,000 Small Business Administration loan Aug. 21, 2006, through the bank.

Spott warned the restaurant Nov. 19, 2008, that the loan was in default and that legal action could be taken after the owners allegedly failed to make full “good faith” payments on the loan in September and October 2008.

Rotelli, located at 250 E. Calder Way, has escaped going out of business before.

The restaurant failed to pay $190,256.36 in rent to its landlord, according to a complaint filed in Centre County Court in February 2014.

Sampsel told the Centre Daily Times last year that he had the right to close the franchise within 30 days at the discretion of the property owner, Calder Joint Venture.

Krauth said it’s important to him to stay open for the community.

“We have a real presence in the community,” Krauth said. “Like, just yesterday, we contributed soup to the Bread Basket Community Kitchen. We contribute soup to them every month. We’re an active part of this community that does charity work every month. We work with State College schools and Penn State, and it’s very important to us to be a part of the community.”

He also feels obligated to continue employing about 50 people at the eatery.

Krauth said he talked about situation to restaurant managers, who briefed employees. He also said he never discussed the possibility that the restaurant would close.

“The future is bright for us, and we have no plans to close any time soon,” Krauth said. “There will not be no auction of our liquor license. We are still operating with our full liquor license, and we’ll continue to operate fully.”