Yellowstone Club on the Ropes
Yellowstone Club Scrambles For Bailout in Bankruptcy Court
With lender Credit Suisse unable to raise cash, Boston-based CrossHarbor Capital Partners may be poised to take control of the ultra-luxury club. But no ruling was issued Tuesday.
By Robert Struckman, 11-25-08
A day-long battle over the future of the bankrupt Yellowstone Club played out in U.S. Bankruptcy Court in Butte Tuesday, with lender Credit Suisse desperately trying to maintain control of the property and block a financing deal from Boston-based CrossHarbor Capital. While Judge Ralph B. Kirscher did not issue an immediate ruling, he appeared highly skeptical of Credit Suisse’s ability to put forward a viable proposal after an interim funding deal fell apart just before the court hearing.
Credit Suisse, one of the world’s largest financial institutions, has been unable to come up with the money for a seven-figure loan package that would enable it to keep control of the club and sell the assets. The bank’s plan apparently involved mothballing the club while it sought buyers—a strategy that many involved in the case believe would be a disaster.
CrossHarbor, for its part, has proposed putting up $20 million to keep the club operating through the winter season while a long-term re-organization plan is developed. Club members, some of whom were in court Tuesday and who are understandably eager to see the club remain open, agreed to pitch in another $5 million as part of the CrossHarbor plan.
The Yellowstone Club, a private ski and golf resort for the mega-rich near Big Sky, Mont., filed for Chapter 11 bankruptcy on Nov. 10, and a few days later the court approved an interim financing deal from Credit Suisse, which is the club’s primary lender and thus the biggest creditor in the bankruptcy proceeding. That loan was for just $4.4 million, enough to keep the club running for a few weeks while a broader deal was hammered out. The club has debts of at least $365 million, with the bulk of that owed to a consortium of lenders led by Credit Suisse.
If the CrossHarbor deal goes forward, Credit Suisse will no longer be first in line to be paid off if and when the club is able to re-organize, and thus it opposes the proposal. As the primary creditor, its stance carries a lot of legal weight in the bankruptcy proceedings.
But a plan that involved closing the club, even temporarily, would likely destroy much of its value and thus be detrimental to most creditors—not to mention club members, employees and the communities of Bozeman and Big Sky.
CrossHarbor, led by investor Sam Byrne, owns a substantial chunk of property at the club and had tried to buy it from founder Tim Blixseth earlier this year. Tim Blixseth’s ex-wife Edra is now the nominal owner of the club, having gained control as part of their divorce settlement. But the equity in the club is almost certainly worthless and effective ownership lies with Credit Suisse. Edra Blixseth, who had testified in favor of the Credit Suisse interim financing that was approved two weeks ago, was not in court Tuesday.
It was a day of high drama as the judge heard arguments and then called a recess while the parties tried to negotiate privately. By noon, the terms of the CrossHarbor loan hadn’t been worked out—or agreed to by representatives of Credit Suisse, whose attorney was loathe to allow any other lender to get ahead of its massive debt. Credit Suisse offered to continue financing the club for one more week, with the hope that the extra time might allow the Swiss-based banking giant to pull together enough cash to shut down and sell the club.
“I can assure Your Honor that the existing lender will object to any priming motion,” said the lawyer for Credit Suisse. A priming motion would allow a lien placed by a new lender to get in front of the interests of other creditors, namely Credit Suisse. But almost any lender would be unwilling to lend millions of dollars secured by a junior lien. Credit Suisse indicated the one-week deal would be satisfactory, even though it offered nothing close to a guarantee that the club would remain open.
But Judge Ralph B. Kirscher indicated he might be willing to overrule Credit Suisse’s objections.
“Are we prolonging the inevitable and incurring more debt? There are many employees, prospective employees, I’m sure, who are wondering if they should relocate to Big Sky for work or go somewhere else to find work,” Kirscher said. “I don’t want to drag this out too long, because that won’t help anybody in the end.”
A ruling is likely to come as soon as tomorrow morning.
[End of article]What a story! Clearly CS is at its limit and want to go for the famous chapter 7. Sam Byrne wants the club and at this stage, let him have it. Such ego's at work. A little CYA seems to be the driving reason. Sam is the strongest player considering Edra is in default on the 35 million loan on her personal estate in Rancho Mirage as the AP has reported. Sam convert your 35 million, take the club and show the world how great you can be owning a club where the members are going to have a lot to say to you once you put your money in the game this time. Maybe even show the members you will finally pay your fees and annual dues for once. The big surprise is when you tell them Tim Blixseth is your partner. Long live the King of the Mountain. Tim Blixseth, this is by far your greatest deal yet! Well done
Comment By YCOldSkool, 11-25-08CS is shooting themselves in the foot by not working out a deal. Who is going to buy the club if it folds and is liquidated? It just won't have the same value! Clearly, Sam and the members could, but why not just get it over with now! Let Sam do the interim financing and have the winter to figure out a long-term plan, and to gain the trust of creditors and employees, and more importantly preserve the value of the club. Let's get this done!
Comment By Sharkbait, 11-25-08What is the sense of commenting if you try to bring up legitimate questions and accurate moral, ethical flaws for everyone to research! Do the all the players involved not want the publicity is that the reason for my comments were deleted in the past!? Bob be sure to approach all the talk and court stuff with a grain of salt. Birds of the same feather flock together! Judge do not let the weasel get the first lien and CS why do you not pursue the real criminal in this matter!
Comment By Wageslave, 11-25-08Housing bubble? What's the trouble, don't ya know it appraised for double? Remember when the Chronical made the week-long special about how great the big money of the "new west" was? How are kiddies will work their dream and we will get a food bank? Looks like nobodies gettin' outta this one. Once China realizes we are printing paper...whew! Those might be some nice cabins up there for subsistance hunting. I picture a ghosttown. Commercial alt-a is the next shoe to drop I think. Horse leads the cart, horse has gone into the wall...then the cart...then the master...
Comment By Wageslave, 11-25-08Just a thought...I recall a certain accountant woman who worked for YC. She was accidentally killed when her house exploded. My theory is Timmer is where the action is. Think oil tankers, Somalia and boomtowns. Since YC members play by different rules; perhaps the HOA could send an interest representative to The Kingdom. Meet with the Family and have a Specialist take care of the problem. I mean, it's like the whole "tree falls in a forest...". If Anna Nicole Smith suddenly had an overdose... An Enron CEO has a heart attack before he is tried... A woman that worked at Macy's in Bozeman committed suicide by locking herself in her trunk...
Comment By Fan, 11-26-08Natacha.....your rants are out of control. Take a deep breath and relax.
Comment By Mehmnet, 11-26-08Credit Suisse is following accepted financial strategies when dealing with legitimate bankruptcies. Problem is, YC was nothing but a pyramid scheme. Under that kind of scenario, "BAU" is not possible. The money's gone, taken by the scammer, and everybody is just - well..."$crewed"...
Comment By Jonathan Weber, 11-26-08Editor's Note: We have deleted postings from this thread which are in violation of our comment policy. Natacha and Sharkbait, you are well aware of the comment policy, which among other things prohibits personal attacks. Please adhere to the policy and, as I've said numerous times, we are always interested in real information and invite you to get in touch with Bob or myself if you have information to share.
Comment By Fan, 11-26-08Well it looks like I have a job still. Thanks Sam.
Comment By Toothfairy, 12-02-08Here's a Title question. How can CS loan well over $300M on the property, and be at risk of not being in first position? Secondary loans tyically come after the fact, and as such are junior to the first position loan which in this case I would think is CS?
Can anyone explain?
In Chapter 11, the Judge has the power to rearrange the priority of the debt. His choice here:
1) Allow CS to extend another small loan in an amount adequate to wind down and liquidate the Club's assets (and keep CS on top), or
2) Allow CH to extend a larger loan in an amount adequate to operate the club through the ski season. This forestalls the "day of reckoning" until Spring, when in theory the club will have had more time to work out a major refinancing, sale, etc. which won't shut it down. In this case, the smaller CH loan goes over the larger CS loan, because without that CH would never make the loan and this option would not exist.
So in picking #2 the Judge made an executive decision because he thought CH's plan was better. If CS had suggested something more palatable than liquidation, they may easily have prevailed. I think most locals, YC employees and YC members would agree with the Judge. Option #2 doesn't guarantee that the club will still be operating and employing people after next Spring, but it does at least offer another chance at a restructuring that won't shutter the place and lay off 100%.
If things are done properly and the club is restructured or sold without shutting down, the CS position could easily remain more valuable even with the smaller CH position over it. In my opinion, demanding priority of a $300M amount over a $25M amount when only offering liquidation as an option was pennywise and pound foolish for CS to do.
Who knows what Spring will bring, but the Judge made the proper decision last week.
Thanks you Renon for a very good/ clear answer to Toothfairy's question.
To elaborate a little, bankruptcy judges have pretty broad power to make rulings that are in the best interest of creditors. While the bigger creditors perforce get more consideration, they do not dictate the outcome. I also agree with Renon that CS seems to have misplayed its hand, though I am sure they will be back.
I believe the Club is in great hands now. Sam Byrne has been a hero to all the staff, the creditors and the members. Its a time for a celebration for the 'White Knight' coming to the rescue. Lets agree to support all the efforts of Sam Byrne through these very challenging times. He is a very powerful investment banker with far reaching powers. Better to join such a leader in today's terrible market conditions. The members will again have the fresh chocolate chip cookies with hot cider waiting for them in the Warren Miller Lodge and the 1000 plus staff are guaranteed a salary till April. how do we go about thanking such a generous man and Cross Harbor. I believe its time to have a full feature article about Cross Harbour given their generosity to the city of Big Sky. Maybe a parade down the hill. As Christmas is nearing close, its a time to reflect and put aside our differences and give thanks to those who give so much to the community of Big sky. Thank you again Sam Byrne for making this all possible. Forbes 400 here you come and we are here to support you. Your not only a local hero in Boston but now Big Sky. Sharkbait, show some empathy, get to know our new powerful leader and just maybe he will pay those creditors, vendor, contractors and suppliers who are without food, ability to make their mortgage payments and risked their family savings working at the 'Famous Yellowstone Club' If what we read is true, Sam Byrne is the type of man to meet face to face with all those the club owes money to and to promise them he will make good on his word to fix all their problems. He seems to be a very honorable man as the Judge has sighted and am sure he wishes to make peace with all those who are owed money and not hide behind the Bankruptcy protection after April. After all, Sam Byrne surely did not make this great loan only to allow the members to ski this season! This gift of kindness from Sam Byrne of 20 million is an early Christmas present to all those concerned. Greg Lemond, you get a bag of coal in your stocking but you have made a lot on the money received so far, so let your lawsuit drop and move on with your life. Look at Lance, he is back riding his bike for a living to raise money, maybe you get back on your bike for a change and leave our new Hero alone!
Merry Christmas to all and to all a good night.
Jonathan Weber, (Owner / Editor of New West)
Given your readership knows very little about Big Sky's new Hero being Sam Byrne, maybe for the readers understanding you could do a feature article about Crossharbor and Sam Byrne? An article on who this firm is, where they get their funds, what have been some of their big investments over the last 9 years, the reason this group is one of the only successful real estate funds in the USA when others are failing? Its time to get to know the new owner, the new financial muscle who took on the goliath of CS and won the battle. Very little is known about this powerful group and its leader. I believe it would be of great interest to read about such a company and such a HERO on how they became so successful. Their website clearly shows nothing to the outside world. Thank you to consider running such a profile story to all your readers and do so in a very positive manner as he is truly a Big Sky Hero to all of us.
Interesting. Crossharbor is enjoying great success when all the other real estate firms are tanking. Hmmm... Sort of makes you wonder, doesn't it?
Comment By Fan, 12-03-08Well Well Well....Natacha, It is nice to read positive comments from you. What I want to know is WHY the sudden change. In the past you did not have a good word to print about the CLUB, and now you come across as it is the greatest thing ever.
Sam is not the Savior, but he is a very concerned member. Thank god he is able to see the big picture.
Fan
Dear Editor
Any thoughts on a 'Feature Article' on Crossharbor / Sam Byrne? I think its a great story that this incredible investment firm is the only group not impacted by the Economic Crisis / Banking Crisis like the rest of the world. Truly an amazing accomplishment. The part about loaning Edra Blixseth $35,000,000 as reported by Bloomberg in their article and also being stated by Bloomberg as a record of fact that that loan is also in default since October 2008 is a great paragraph on what it takes to be a shrewd and successful investor like Crossharbor. If this is how deals get done, I believe we deserve to know how its all possible and more importantly know more about the new leader of the Mountain. This is not meant to be sarcastic, rather many readers want to know how he is so successful when others are failing? We may all want to place our retirement savings with him if the story is validated? Please do let us know NEW WEST Editor if you will do a feature article on the 'Man who took on Credit Suisse, Tim Blixseth and Edra Blixseth to win this club' I await your response.
natacha,
By all your details it seems like you would have to be a club employ or former employee of tim's to know all the details of real estate transactions that by law in montana are confidential, as are member records. you seem pretty certain that Mr. Byrne hasn't paid his bills. Can you prove it? or is this just more rants? what is your affiliation with the yellowstone club, if you profess to have so much info for the public.
let's add a few points for consideration
1. Sam bryne does not own the yellowstone club, he just lent the Dip financing to keep the place operating over the winter. last time i checked edra blixseth still owned the club.
2. tim blixseth built and sold 15 of the sunrise units before the deal to sell the remainder to CH. so much for your accuracy in accounting, also the way i figure it all the buyers of sunrise also help to offset the operating costs of the club. why do you expect him to subsidize other members for their use of the club, by paying annual dues for every unsold condo.
3. "he is making the membership pay more fees", hard to do if he isn't the owner. i believe that this is actually supported by the member committee, but perhaps not all members. They like many people here want to see the club open this winter. "Under the CrossHarbor deal, which club members greeted with enthusiasm, members agreed to pay accelerated dues to raise another $5 million to help run the club through the ski season, when its employee count reaches almost 1,000." New West 11-26-08
4. where did you come up with 20%, out of your hat or is that in a public document?
5. in 2008 sunrise had over 30 members who paid their memberships and dues, yet you miss this point, creative accounting. funny you seem to portray like you know all the details and miss the simple fact that units have sold over the last few years..
the real facts, regardless of how the club got here the Bankruptcy will bring all the ghosts out of the closet. who knows what and how much was promised to each member by tim in the early years. this restructuring will force a long term plan that works or the club will sell. no matter who buys the club they would be unlikely to assume all the risk or liability of the previous owners. like it or not the YC, moonlight basin, and spanish peaks have been a driving force in the local economy of south west montana, and if one fails the impact to the local business and vendors would be great. Mothballing the club and liquidating its asset destroys all the value, including the value of the credit suisse investors(think YColdschool got it right, as did the judge).