Yellowstone Club Loan Info Sought

Credit Suisse Execs Subpoenaed Over “Predatory” Yellowstone Club Loans

Yellowstone Club founder Tim Blixseth has subpoenaed 31 Credit Suisse officials, demanding that they hand over documents that will shed light on the “predatory lending practices” involving the ritzy club, according to a story today in Marketwatch.com. The source of the story is the Blixseth Group, which is headed by Tim Blixseth.

Here are some story highlights (much of them representing the Blixseth Group’s spin on current events):

-- “Brady Dougan, the Chief Executive Officer of Credit Suisse First Boston, and Hans-Ulrich Doerig, Chairman of the Board of Directors, received the subpoenas along with past and current Executive Board officials and Credit Suisse’s Board of Directors.”

-- The subpoenas stem from the $375 million Credit Suisse loan to the Yellowstone Club in 2005. Blixseth wants to uncover internal documents that explain how the bank developed the loan scheme (one that U.S. Bankruptcy Judge Ralph Kirscher described as “naked greed” that “shocks the conscience of this court.")

Bankruptcy Aftermath

Yellowstone Club Pays $6 Million to Local Creditors

Nearly $6 million in checks were distributed this week by the Yellowstone Club, satisfying almost all the claims of more than 140 vendors and contractors who have been waiting almost a year for their money.

The payments came as a result of an unusual bankruptcy court settlement in which trade creditors are getting their money before the consortium of lenders led by Credit Suisse gets theirs. It is very rare in a bankruptcy case for unsecured creditors to get paid in full ahead of secured lenders.

In a letter accompanying the checks, Sam Byrne, managing partner of CrossHarbor Capital and the new owner of the club, said: “Yellowstone Club, its new owners, members and employees all recognize the delay in payment of these monies has caused significant financial hardship for many who provided goods and services to Yellowstone Club. We hope that full payment on your approved claims will provide some relief to his financial burden, and that this will be the beginning of a rebuilding of the reputation of the Yellowstone Club with vendors and service providers in the Big Sky and greater Bozeman communities and beyond.”

While most of the club’s trade debt has now been paid, considerable friction has emerged between the so-called Liquidating Trust - the entity charged with collecting money and paying it to those who are owed - and the committee representing unsecured creditors. The trust, which is being managed by New York-based attorney Mark S. Kirschner, has sought to disallow even some small claims on the grounds that they are the responsibility not of the club but of former club owners Tim and Edra Blixseth.

Big Sky, Past and Future

Of Myth and Money at the Yellowstone Club

On a recent tour of the Yellowstone Club, the now-infamous private ski resort near Big Sky, Montana, my tour guide gestured out the window of the SUV.

“This is the Taj Mahal of Tim Blixseth,” he said as the gargantuan $100 million Warren Miller Lodge slid into view. While the original Taj Mahal was built in Agra, India, as an enduring symbol of love, the Warren Miller Lodge apparently took its notes from the Trump Taj Mahal in Atlantic City. When compared side by side, these two building share striking commonalities: builders with sizeable egos, high-profile divorces and difficult bankruptcy proceedings. Their oversized décor and glitz created a mirage of riches while masking less lustrous behind-the-scenes activity.

At the Warren Miller Lodge, however, it appears that the spirit of Montana is gaining the upper hand. The motion sensors operating the immense entrance doors have been switched off. The bears, smart creatures that they are, had been taking advantage of the technology to wander freely into the lodge.

Keeping out the uninvited was a key feature touted by Tim and Edra Blixseth when they opened the Yellowstone Club in 1999. In what is now common lore, the property, acquired in part via a land swap with the U.S. Forest Service, was originally tagged to become the Blixseths’ personal vacation retreat until the plans snowballed into a massive real estate development. Now, in the wake of a tumultuous bankruptcy that resulted in the sale of the club and left the Blixseths (now divorced) facing a veritable mountain of legal and financial claims, a new chapter is opening for the spectacular 13,400 acre property.

But to see where the club might go from here, it’s useful to consider where it has been—and how the myth of the Blixseths snowballed out of control.

Bankruptcy Payout

Yellowstone Club: 800 Checks in the Mail

Hundreds of employees, tradesmen and vendors who are owed money by Yellowstone Club will be getting paid this week in accordance with the private ski resort’s emergence from bankruptcy protection. A spokeswoman said 800 checks have gone out this week - a welcome cash infusion not only for the individuals and businesses involved, but for the slumping economies of Bozeman and Big Sky.

The payments this week cover back wages owed to current and former employees as well as so-called “convenience claims” - amounts of $5,000 dollars or less.

Bankers on Trial, Again

Lake Las Vegas Creditors Mimic Yellowstone Club Lawsuit

Like the Yellowstone Club and a number of other major resort projects around the country, Lake Las Vegas in Nevada took a giant loan from a Credit Suisse-led lender group, allowed the owners to pocket the bulk of the proceeds, and then abruptly fell into bankruptcy when the real estate meltdown hit. Now, following in the footsteps of the Yellowstone Club creditors successful lawsuit against Credit Suisse, the creditors committee in the Lake Las Vegas bankruptcy has filed a suit against the banking giant, seeking to have some $545 million in loan proceeds invalidated as a "fraudulent transfer" and returned to the company to satisfy creditors.

The owners of Lake Las Vegas, primarily developer Ron Boeddeker and Texas investors Sid and Lee Bass, took some $685 million in loans from Credit Suisse in 2004 and 2005, according to the complaint, and pocketed $470 million in cash as a return on equity, with Credit Suisse earning about $13 million in fees. The development, a 3,500 acre Mediterranean-themed community with an artificial lake and three golf courses about 20 miles outside of Las Vegas, filed for bankruptcy protection in July of 2008.

Resort Real Estate

Yellowstone Club Sold to CrossHarbor Capital

The sale of the Yellowstone Club to Boston-based CrossHarbor Capital Partners was formally completed Friday, ending the main chapter of an extraordinarily tumultuous bankruptcy proceeding and paving the way for the revitalization of the luxurious private ski resort.

CrossHarbor, led by real estate investor Sam Byrne, paid $115 million for the 13,600 acre club near Big Sky, Montana, and has committed additional money to fund operations and assure payment of trade creditors. CrossHarbor will operate the club in partnership with Discovery Land Co., and plans to invest in additional ski terrain and re-orient future real estate development away from the steep hillsides and toward the base area.

The high-end resort real estate market is moribund, and it's not clear how quickly the sale of multi-million-dollar lots and condos and $300,000 memberships might resume. But the sale assures that the club will remain open and employees will keep their jobs, and the many tradesmen in Bozeman and Big Sky will receive the money that they are owed and have at least the hope of future work at the club.

“I am very happy that the Yellowstone Club has today successfully emerged from bankruptcy as a well capitalized enterprise that will have a bright future for its members, employees and the community," Byrne said. "This reorganization is not only a great result for the club, but also for the local vendors and trades people in the greater Big Sky community who will, after a long wait, be paid the monies due to them.”

Bankruptcy Court, or Divorce Court?

Yellowstone Club Chronicles: Edra Forced to Liquidate, Tim Launches PR Campaign

The scene in U.S. Bankruptcy Court in Butte on Tuesday, where a hearing was held on former Yellowstone Club owner Edra Blixseth's last-ditch effort to keep control of her disastrous financial situation, was more poignant than dramatic. Edra, looking downtrodden, spent most of the day in the witness chair, trying to explain how and why she had messed up her bankruptcy case by failing to maintain insurance on her assets and filing important court documents late and incomplete.

Meanwhile, in the back corner of the Beaux Arts courtroom - which was packed during the Yellowstone Club bankruptcy proceedings but on this day was mostly empty - sat her ex-husband Tim, accompanied by his son Beau and his new wife Jessica, ready to drive more nails into Edra's coffin.

In the event, Tim Blixseth's presence, and the colorful but harsh 26-page affidavit he filed last week outlining his ex's alleged bad behavior, were academic, at least for this proceeding. The court had already converted Edra's Chapter 11 bankruptcy filing, in which she would get the chance to reorganize her own affairs, into a Chapter 7, a forced liquidation overseen by a U.S. Trustee. Tuesday's hearing (which I was able to attend only briefly) was her chance to argue that the decision should be reversed. But it seemed like a long shot, and indeed U.S. Bankruptcy Court Judge Ralph B. Kirscher denied the motion, setting the stage for a fire-sale of the Porcupine Creek estate and Edra's numerous other properties at the Yellowstone Club and elsewhere.

Tim Blixseth's court filing, though, was about more than his ex-wife's bankruptcy. The Yellowstone Club founder argues that the whole financial debacle that enveloped the club last year, and resulted in the club's bankruptcy filing and the eventual sale of the property to CrossHarbor Capital Partners, was Edra's fault. He's now hired a public relations firm to help him make the case - which, as we'll see in a minute, remains a very high-stakes affair.

Tim vs. Edra

Yellowstone Club Chronicles: The Edra Blixeth Bankruptcy

The Yellowstone Club bankruptcy may be all but over, but lest the lawyers - or the journalists for that matter - worry that they'll be out of work, we now have what might be called Yellowstone Club 2: The Edra Blixseth Bankruptcy.

Like the original Yellowstone Club case, this is anything but a normal bankruptcy proceeding, with Edra Blixseth initially filing a Chapter 11 bankruptcy that showed personal debts of more than $500 million. Earlier this month, Judge Ralph B. Kircher - the same federal bankruptcy judge who heard the Yellowstone Club case - converted her Chapter 11 filing to a Chapter 7 liquidation - a decision Blixseth is now trying to get reversed.

In a court filing late last week, Edra Blixseth outlined how she hoped to reorganize her affairs and get people paid, namely by developing (and then selling) her Porcupine Creek estate in Palm Springs as a residential golf club, reviving her highly controversial software company, Blxware, and pursuing legal claims against her ex-husband Tim and others. (A PDF of her affidavit is here).

On Thursday, Tim Blixseth fired back in spectacular fashion, filing a court declaration that lays out in great detail his argument that his ex-wife's wild spending and "dishonest tactics" were actually the cause of all the problems. (PDF here) The affidavit offers lurid details of Edra's alleged excesses - including a supposed "divorce celebration" party which cost $90,000 and included "invitations in the shape of a parking meter which, when opened, revealed my face and read 'your time has expired'."

Yellowstone Club Saga Continues

Judge Defers Decision in Lawsuit Against Tim Blixseth

In a mixed decision that answers some questions but leaves many others open, U.S. Bankruptcy Court Judge Ralph B. Kirscher on Thursday threw out a key portion of Tim Blixseth's defense in the Yellowstone Club bankruptcy court lawsuit, but at the same time re-opened the trial and set an August date for the proceedings to continue.

The lawsuit by the club and the committee representing unsecured accused Blixseth and investment bank Credit Suisse of engaging in a "fraudulent transfer" and breach of fiduciary duty in connection with a $375 million loan to the club in 2005. Kirscher last month issued a partial ruling against Credit Suisse, putting the claims of its lender group at the back of the line due to what he characterized as the "predatory" and irresponsible nature of the loan. That ruling prompted a settlement of the main bankruptcy case, with CrossHarbor Capital Partners buying the club for $115 million in a complex deal that assured that all unsecured trade creditors would get paid.

The settlement called for the court to vacate its ruling against Credit Suisse. But the claims again Tim Blixseth, who could ultimately be forced to repay more than $200 million, remain unresolved.