Central Falls Detention Facility Corporation, doing business as the Donald W. Wyatt Detention Facility, filed for chapter 11 protection on July 10, 2026 in the U.S. Bankruptcy Court for the District of Rhode Island, case number 26-10628, with a restructuring support agreement, proposed plan of reorganization, and disclosure statement already on file. The debtor said it can no longer continue payments on more than $167 million of bond principal and interest tied to the 782-bed detention facility, which has run below capacity for years while absorbing a decade of litigation with its bond trustee and the City of Central Falls, a 2023 ransomware attack, and the data-breach litigation that followed.
The proposed plan is backed by holders of 71.2% of existing bond principal and by a settlement with the City of Central Falls. Judge John A. Dorsey is presiding over the case, which entered its first week with an interim cash-collateral order and interim wage authority, while the disclosure statement remains unapproved and the plan's per-class recovery percentages have not yet been finalized.
Debtor
Central Falls Detention Facility Corporation (d/b/a Donald W. Wyatt Detention Facility)
To finance a 2006 expansion, the debtor issued $106.38 million of Series 2005A revenue-refunding bonds in June 2005; as of the petition date, $97.3 million of principal and $71.8 million of interest remained outstanding, with UMB Bank, N.A., as successor bond trustee, holding liens on the debtor's real property, revenues, personal property, leases and rents.
The 782-bed facility, which includes a 40-bed female housing unit, detains individuals for the U.S. Marshals Service, U.S. Immigration and Customs Enforcement, and the U.S. Navy under a contract extended through March 2027, at a per diem rate of $180.97 per detainee. Average daily population has run around 675 over the past five years, well below the facility's rated capacity, leaving operating revenue chronically short of what the bond debt requires even as the debtor says day-to-day operations will continue throughout the case.
The disclosure statement proposes to eliminate roughly 60.1% of that bond debt, or about $101.6 million of principal and interest. The facility employs approximately 263 people — 252 full-time and 11 part-time or per-diem — of whom approximately 206 are unionized under Fraternal Order of Police Wyatt Lodge 50 and Rhode Island Council 94, AFSCME, AFL-CIO.
Forbearance Amendments and the 2019 Litigation
Cornell Corrections operated the facility from its 1993 opening until the debtor terminated that contract in 2007. A dispute over local impact-fee payments led the City to suspend fee collections in 2009, and by 2014 the Bond Trustee's designated Keeper, Jonathan Savage, had taken over facility operations as bond defaults mounted.
The debtor and Bond Trustee entered a forbearance agreement in March 2015, followed by a First Amendment in May 2017 under which the trustee advanced $900,000, and a Second Amendment in March 2018 that included a $388,000 advance tied to a fence project. A Third Amendment in January 2019 provided a bridge loan, and a March 2019 addendum addressed ICE detention terms.
In April 2019, an attempted dissolution of the debtor triggered an ICE suspension of its detention contract and prompted federal court litigation among the debtor, the Bond Trustee, and the City; the court entered a preliminary injunction and appointed a Board Monitor and Special Master to oversee operations. A new forbearance agreement in October 2019 resolved the immediate dispute, and the Board Monitor and Special Master roles were terminated in February 2020 and February 2023, respectively.
Days before the petition, board chair James J. Lombardi III resigned, leaving the five-member board without a chair after it lacked a quorum to accept the acting-chair vote. The development added a governance change to a facility already navigating the bondholder and City disputes addressed in the proposed restructuring.
COVID-19 Disruption and the 2023 Ransomware Attack
The COVID-19 pandemic disrupted detainee population levels and operating costs beginning in March 2020. The debtor received a $2,903,400 Paycheck Protection Program loan in April 2020, forgiven in July 2021, followed by a second $2,000,000 PPP loan in February 2021 that was forgiven in October 2021.
In November 2023, a ransomware attack on the debtor's systems exposed personal data of 18,500 individuals, and a related class action followed on July 19, 2024. The debtor cites both the pandemic disruption and the ransomware incident, layered on top of the bond dispute, among the drivers of the chapter 11 filing.
Mediation, RSA, and New Series 2026 Bonds
Magistrate Judge Patricia A. Sullivan mediated settlement talks after the underlying federal court litigation was stayed through July 7, 2026. Those talks produced a restructuring support agreement, executed June 19, 2026, under which the City and holders of 71.2% of existing bond principal agreed to a deal that would waive more than $100 million of debt while providing the City guaranteed annual impact payments.
Under the filed plan, holders of existing bond claims would receive pro rata interests in $67.5 million of new Series 2026 Bonds — $27.5 million of amortizing Series 2026A bonds and $40 million of Series 2026B bonds paid from excess cash flow. The plan also funds a $7 million operational reserve, a $4 million capital reserve, and a $2.75 million debt-service reserve, and contemplates cramdown confirmation if a class votes to reject.
The plan's proposed releases extend to the debtor, reorganized debtor, Consenting Holders, the Bond Trustee, the City, and related parties. As of the disclosure statement filed with the plan, projected recovery percentages for several impaired creditor classes had not yet been populated, leaving those figures for a later amended disclosure statement or confirmation-stage filing.
City of Central Falls Settlement Terms
Under the proposed settlement, the reorganized debtor would pay the City a $250,000 annual local-impact payment in monthly installments, subordinate to Series 2026A debt service, plus a $25,000 annual charitable donation and up to $400,000 for community amenities during the first 12 months. The package was framed at filing as providing impact payments to the city while keeping the facility operating, and it also allocates 5% of excess cash flow toward redeeming the Series 2026B bonds.
The debtor's impact-fee history with the City predates the current dispute: it paid $5,386,130 in local impact fees between 1994 and 2009, before the City suspended collections, and $516,166.50 since payments resumed in 2015. It paid another $250,000 to the City on April 10, 2026, covering fiscal-year 2025-26 impact fees ahead of the settlement.
Interim Cash Collateral Order and Case Milestones
The debtor sought no debtor-in-possession financing; instead, the court entered an interim cash-collateral order on July 15, 2026 authorizing use of prepetition-collateral proceeds from facility operations under an approved budget. The order grants UMB Bank replacement and supplemental liens, subject to a $300,000 wind-down carve-out and existing priority liens, plus a section 507(b) superpriority claim for any diminution in collateral value.
The budget allows payments of up to 110% and requires receipts of at least 85% of projections over a rolling six-week period, with biweekly budget reports, a monthly reporting package, and weekly Tuesday lender calls. The order sets case milestones for a final cash-collateral and disclosure-statement order within 50 days of the petition date — around August 29, 2026 — confirmation within 90 days, around October 8, 2026, and plan effectiveness within 30 days of confirmation, around November 7, 2026.
The court also entered an interim employee-compensation order capping prepetition wage priority claims at $17,150 per employee under section 507(a)(4). The debtor's cash-management and insurance-continuation motions, along with a utility motion proposing an $85,000 adequate-assurance deposit against roughly $170,000 in monthly utility spend, were scheduled for interim approval at the July 16 hearing.
Key Timeline
Date
Event
1991
R.I. General Assembly enabling act and inter-governmental agreement create the debtor
1993
Facility opens under original operator Cornell Corrections
June 30, 2005
Debtor issues $106.38 million of Series 2005A revenue-refunding bonds
Bond Trustee-appointed Keepership begins under Jonathan Savage
March 30, 2015
First forbearance agreement with the Bond Trustee
April 2019
Dissolution attempt, ICE suspension, and federal court litigation among debtor, Bond Trustee and City
October 30, 2019
2019 forbearance agreement resolves the federal litigation
November 2023
Ransomware attack exposes data of 18,500 individuals
July 19, 2024
Data-breach class action filed
June 19, 2026
Restructuring support agreement executed
July 10, 2026
chapter 11 petition, plan of reorganization, and disclosure statement filed
July 15, 2026
Interim cash-collateral and employee-compensation orders entered
Key Timeline
Frequently Asked Questions
Who is the claims agent for Central Falls Detention Facility Corporation?
Epiq Corporate Restructuring, LLC serves as claims and noticing agent under its retention application, with a $25,000 retainer and hourly rates ranging from $65 to $195.
How much of the existing bond debt would the plan eliminate?
The disclosure statement proposes to eliminate about $101.6 million, or 60.1%, of the more than $167 million in outstanding bond principal and interest, replacing it with $67.5 million of new Series 2026 Bonds.
What is the prepetition wage priority cap in the case?
The interim employee-compensation order caps prepetition wage priority claims at $17,150 per employee under Bankruptcy Code section 507(a)(4).
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
