Bankruptcy closes Midtown II diner

The Midtown II, a landmark diner and bar that has thrived on the edge of the city's Gayborhood for 43 years, will close its doors for good next week, the result of a series of financial setbacks that landed its owner in bankruptcy court.

According to documents filed last week in U.S. District Court in New Jersey, the diner's owner, Gus Hionas, has agreed to relinquish ownership of the Midtown II and its liquor license to its creditors to settle at least $4.2 million in debts.

Hionas, who founded the Midtown II in 1974, declined to comment on the bankruptcy.

For decades, the eatery, at 11th and Sansom Streets, has been a dependable destination for scores of regulars, said Amy Liatos, Hionas' daughter.

"It's like Cheers in here," Liatos said, referring to the TV comedy series centered on a fictional Boston bar. "We know everyone and everyone knows us."

Among those who patronized the place were doctors and nurses from neighboring Thomas Jefferson University Hospital, municipal court judges, late-night club-goers, and generations of neighborhood residents.

Liatos, 35, said the diner's staff took pride in keeping the restaurant open during the most challenging conditions. "We stayed open through blizzards, hurricanes - even the pope," Liatos said.

What menacing weather couldn't accomplish, the health department could.

During the last two years, the department's sanitarians cited the diner for 125 health code violations, 66 of them serious, according to city records kept on the Inquirer's Clean Plates database.

After the Midtown II racked up 37 health violations in February, the city issued a cease-and-desist order that closed the diner for two days.

Hionas, 67, defended his diner in an interview with the Inquirer after the inspection.

"It makes no sense," Hionas said. "I've been here for 43 years, in the same location, and never poisoned anyone."

He said business collapsed by 40 percent after the health department report.

But the failed inspection, which Liatos described as uncompromising and harsh, was just "the icing on the cake."

Liatos said the Midtown II's financial woes began in 2000 when her father mortgaged the restaurant for a $700,000 loan.

The diner was leveraged twice again for an additional $4.2 million to finance construction of the Cosmopolitan, a restaurant in Vineland, N.J., according to court documents.

In 2013, as business sputtered at the Cosmopolitan, Hionas was unable to make payments and defaulted on the loans. Last year, the Vineland property was shuttered and Hionas filed for Chapter 11 protection.

The Midtown II diner had been scheduled for sheriff's sale in February 2015, but its sale was delayed by bankruptcy proceedings, according to court records.

Most of the Midtown II's employees have already found work at other city diners, she said. Her father will retire. Liatos, who grew up at the Midtown II, is uncertain what her next move will be.

"I'm sad to see it all go," Liatos said. "I've had a great life here. "

samwood@phillynews.com

215-854-2796@samwoodiii