The YMCA of Greater Pittsburgh wants to dismiss its Chapter 11 bankruptcy case, saying a recent lease settlement with its Downtown landlord will allow it to reorganize and pay off other creditors outside of court protection.

The YMCA filed for bankruptcy in May, citing the lease at its Downtown fitness center on Fifth Avenue near Market Square as the primary reason the nonprofit had an annual deficit of $1 million.

In June — days after closing the facility — the YMCA reached a deal with landlord Millcraft Industries to pay more than $2.75 million it owes the real estate company over the next four years. It was paying about $100,000 monthly to Millcraft for the space.

“The YMCA filed its bankruptcy when faced with catastrophic liabilities that would have arisen outside of bankruptcy if it breached the lease for the Downtown Y,” the nonprofit said in a motion to dismiss the case filed this week in U.S. Bankruptcy Court.

“The court-approved settlement ... has fixed the YMCA’s liability [to Millcraft] and has otherwise allowed it to take necessary further steps so the YMCA can pay its trade creditors and meet its debt service obligations without the need for continued protection of the Bankruptcy Code,” it said in the court filing.

The YMCA also wants to shed administrative expenses associated with a Chapter 11 case, it said.

Besides savings on attorney fees and court costs, the YMCA stands to benefit from “announcing a successful reorganization,” according to the motion.

Under the settlement the YMCA reached with Millcraft, both parties agreed to attempt to find a new fitness center operator for the Downtown branch. Prior to its closing, the Downtown Y had about 2,000 members and 100 employees.

A YMCA spokeswoman said Friday the organization had no updates on whether other fitness centers were interested.

Lucas Piatt, president and chief operating officer of Millcraft, recently told the Post-Gazette, “We are speaking with several operators to take the space. Our goal is to continue the use of health and wellness in the heart of the city for residents and workers alike.”

In its motion to dismiss the bankruptcy, the YMCA said it is current on the settlement payments to Millcraft as well as rent at other facilities it doesn’t own but where it operates programs.

It’s also current on payments for equipment leases, and on loans and credit lines totaling more than $35 million from PNC Bank and KeyBank, it said.

The YMCA, which has an annual operating budget of about $40 million, owns 11 properties in Allegheny County where it operates branches and three YMCA camps: one in Beaver County, and two in Somerset County.

“Perhaps the largest issue faced by the YMCA was the long term lease and losses” from the Downtown site, the court motion said.

The YMCA owes general unsecured creditors about $800,000, according to the court filing.

Ronald Roteman, an attorney with Stonecipher Law Firm which is representing the top 20 unsecured creditors, said, “It’s relatively uncommon” for a bankruptcy case to be dismissed rather than closed after a debtor reorganizes with a plan for paying off creditors.

For the creditors that his firm represents, “I think that a dismissal is welcoming for them,” Mr. Roteman said.

“I think the view is that once [the YMCA] is out of the bankruptcy case, the general unsecured creditors will continue to be treated as if no case has been filed.”

There are many more creditors beyond those represented by Mr. Roteman’s firm. In its original bankruptcy filing, the YMCA estimated it has 200 to 999 creditors.

It listed assets of between $50 million and $100 million, and liabilities of between $10 million and $50 million.

At the time of the May filing, Millcraft was listed as the YMCA’s largest creditor with a claim of about $264,000 over the disputed lease at the Downtown site. The next largest creditor was Specialty Pool Contractors, which was owed about $112,000 for pool construction.

A hearing on the YMCA’s motion to dismiss the case is scheduled for July 25.

Joyce Gannon: jgannon@post-gazette.com or 412-263-1580.

Updated at 4:30 p.m. July 6, 2018.

First Published: July 6, 2018, 2:14 p.m.