Resort Bankruptcies
Moonlight Basin Files for Bankruptcy Protection
The ski-and-golf resort in Big Sky, Montana was already facing a foreclosure proceeding by lender Lehman Bros., and now aims to use the Chapter 11 bankruptcy process to secure new financing and remain open.
By Jonathan Weber, 11-19-09
Moonlight Basin, the troubled Big Sky, Montana ski resort, filed for Chapter 11 bankruptcy protection on Wednesday, just a day before a foreclosure hearing that could have put the property in the hands of its primary lender, Lehman Bros. Moonlight took a loan of $100 million from Lehman Bros. in the fall of 2007 with the intention of quickly selling the resort, but the real estate meltdown scotched that plan, and the bankruptcy of Lehman Bros. itself in the fall of 2008 has left the six-year-old resort in limbo.
In the bankruptcy filing, Moonlight seeks permission to obtain $21 million in interim financing from Trilogy Capital, a Connecticut based hedge fund, which would enable Moonlight to remain open and have a ski season as planned. Lehman Bros. indicated in the foreclosure case that it also intended to keep the resort open, but the investment bank wanted to gain full control and appoint a receiver in the place of current management before it provided the funds needed to continue operations. The foreclosure proceeding, which is a state court action, is automatically put on hold by the bankruptcy filing.
Lehman Bros. is almost certain to vigorously oppose the new financing, since it comes with onerous terms and would be paid back before Lehman or any other creditor received any money. But it will now likely be left with the choice of providing its own interim funding in the context of the bankruptcy, with current management remaining in control, or perhaps trying to force a shutdown of the resort and a continuation of the foreclosure process. A number of contractors and vendors are also owed money - hundreds of thousands of dollar in some cases - and the position that those companies take could also have a significant impact on the eventual outcome.
Property owners at Moonlight also have a stake in the outcome, and some have supported Lehman - though Moonlight says that support came only with the threat of a cut-off of basic services.
Court documents show that Lehman has provided $3.6 million in funding to maintain operations since the loan went into default last fall. But Moonlight says the funds were advanced in a capricious fashion and were not sufficient to pay all the vendors.
The bankruptcy filing carries considerable risks for Moonlight and its owner, Lee Poole. Poole provided a personal guarantee on the Lehman loan, and the bankruptcy filing would trigger that guarantee, meaning that Lehman could go after his personal assets. Sources said negotiations between Moonlight and Lehman had been ongoing, but evidently no settlement was reached that would avert a drawn-out court fight.
In addition to the $100 million loan, there was an additional $70 million loan that was used to buy out Poole’s two original partners in the project, Joe Vujovich and Keith Brown. It’s not clear why the second loan is not subject to legal action thus far. Bankruptcy court experts say the payments to Vujovich and Brown could eventually be challenged in court.
Moonlight, which opened in 2003, is set in spectacular terrain on the west side of Lone Peak, which it shares with Big Sky Resort. While there was conflict in the early days, the two resorts of late have been marketing a joint lift ticket under the tagline “The Biggest Skiing in America.” Moonlight also has a half-finished Jack Nicklaus golf course, and an extensive real estate development business that includes high-end homes, condos and cabins. It employs about 250 people.
In a press release, Poole said: “With this filing, we can assure everyone - our customers, homeowners, suppliers, employees and our communities - that Moonlight Basin intends to be open for business as usual.” The opening is currently scheudled for Dec. 12.
The Moonlight situation has some analogies to the bankruptcy of the neighboring Yellowstone Club. In that proceeding, U.S. Bankruptcy Court Judge Ralph B. Kirscher gave considerable weight to the interests of employees and the Big Sky community, and Moonlight is clearly hoping he’ll take a similar stance in this case. Moonlight enjoys a lot of goodwill in the community, partly because of programs giving students free ski passes, and a number of Madison County officials and others wrote letters supporting Moonlight management in the foreclosure proceeding.
Lehman has proposed appointing a receiver named Doug Wilson, who was also the receiver in the Tamarack Resort foreclosure in Idaho. In that case, considerable bad blood developed between Wilson and other parties, in part over the fees that were charged, and he is no longer involved in that situation. Tamarack remains closed pending a foreclosure trial in February.
Moonlight alleges that its troubles are a result of a “continuing pattern of bad faith by the Lehman entities.” Moonlight engaged Lehman as an investment banker to help spearhead the sale of the property in 2007, and Lehman allegedly said it could do a quick sale in the $300 million to $400 million range and would provide the $100 million loan in the meantime. If it couldn’t sell the property, it would provide long-term financing to replace the bridge loan, Moonlight asserts.
But the real estate market was already cratering in the fall of 2007 and no deal materialized. Lehman, meanwhile, ran into its own crisis and was either unable or unwilling to provide long-term financing. Despite appraisals showing Moonlight to still be worth north of $200 million, people familiar with the situation say the value today is likely less than $50 million.
[End of article]Please Judge - support the community and approve this funding deal to keep MLB alive!
Comment By Skier, 11-19-09Here's an idea! Open up the Jack Creek drainage road to state development. If my memory serves me right, the state offered Moonlight $40,000,000 to develop this into a scenic highway. It would also mean a considerable economic boon for both Madison Valley and Big Sky.
Just my $0.02
Skier,
Do you have a source? I have heard about a potential sale in the past, but never that amount. Just curious...
HWSkier,
Im with you!!!
I'll have to retract my previous comment, as after extensive searching, can't remember the source. Don't want to contribute inaccurate information!
Bottom line, IMHO. If Moonlight closes this winter, it will only negatively impact the local and regional economies as well as make it that much more difficult to attract skiers.
Moonlight has always been a great place to ski. The staff is incredibly friendly too. I really hope that they can get their next round of funding!
Moonlight has become an essential part of the Bozeman, Big Sky and Madison Valley as far as employeeing hundreds of residents from these areas. The closure of Moonlight would be detrimental to these communities that thrive on the ski culture & environment. Please support the continued operation of Moonlight and remember the little people that are the backbone of such enterprises.
Comment By James, 11-19-09Just curious...but do any of you realize the environmental impacts opening up the Jack Creek Drainage road would have on the scenic qualities of Big Sky and the surrounding area? There is a reason Moonlight agreed to only allow access to property owners.
Comment By Richard, 11-20-09Jack Creek is already open now to many, so it isn't totally wilderness. There are many lots already sold along the road within the basin. when the owners of those lots build, the traffic will increase. It is now a gated enclave. The people of Madison County deserve good access to their Mountain Village of Big Sky. (Madison County's single most valuable asset and tax source) To open it would be a draw tourist-wise , nice mountain biking. I even would like those west-side "future lifts" to go in. 360 degrees of the Mountain.
Comment By juancho pacheco, 11-20-09Would anyone care to speculate as to what happened to the 170 million that was borrowed 2 years ago and is now "gone." This whole thing sounds like a replay of the YC. Who is walking away with the money this time? And why is this situation the "fault" of Lehman? (lol@greedand/orstupidity.com)
Comment By HWSkier, 11-20-09^^^ I would "speculate" that the loan was used to buy out the other original MLB owners, build the golf course and continue development and operation of the resort. $92M is the actual amount owed, according to various news articles.
It is the "fault" of Lehman Bros only because MLB took the original loan under the promise that Lehman would either find a buyer for the resort or provide it long-term financing. Lehman did neither and instead went belly up.
The Judge has two choices.
1. Save MLB and all of the jobs and personal investments of those in the community. Let all of us who have already purchased season passes enjoy a great year of snow, and keep the positive momentum in place at the resort.....
OR
2. Side with bankrupt Lehman Bros, which would only - in the very best case scenario - further enrich the few executives who are still employed by that failed operation.
To say LB can't find a buyer for MLB surely depends on MLB's bottom line for a sale. I would assume there are buyers, but apparently not at the current asking price. What would be their market value right now and how would that compare to what they are asking? Although larger and more complex, this situation probably isn't different than what a lot of homeowner are facing.
And it also appears MLB is not currently solvent, to state the obvious. Ski and golf operations seem like they were subsidized by development. Wasn't that essentially the model? So who thinks more development is going to get them out of this? Doesn't seem like spendy real estate is selling real well right now in Big Sky. If that's all reasonable -- appears reasonable to me -- why would any bank fund operations and further development for a loss?
I have no expectation that LB is a bank sent by angels, but this just may be one of those game over scenarios for the current MLB ownership? It will sort out eventually one way or another.
I told you so two months ago--Moonlight will be shuttered just like Tamarack Resort in Idaho. There is absolutely no market for their product and these resorts have sprung up because of two things--easy money and big ego. Those days are long gone and this country faces trillion dollar debts to foreign countries and there is no chance to repay. Instead of taking the money and producing a decent product, these developers built monuments to their out-sized egos and now there's nowhere but down. Instead of investing in manufacturing, farming, businesses (like the smart countries), the money was spent on pillaging the real estate of the West for trophy homes that they couldn't afford. The golf course at Tamarack Resort is up for Sheriffs sale on December 17th and the rest of the resort will follow. Follow what happens at Tamarack Resort and you'll get a good idea of what will happen at Moonlight Basin. Circling the drain.
Comment By fenske, 11-21-09RUgreen writes, "I told you so two months ago--Moonlight will be shuttered just like Tamarack Resort in Idaho.There is absolutely no market for their product "
Maybe no market for the real estate, but I bought my MLB pass and I want to ski the Headwaters this winter.
You seem to be a cheerleader for the failure of a Montana company that employees a lot of my friends and fellow Montanans. Why all the hate?
Regardless of the chapter 11 filing all that it means for us is better deals. I found a sweet deal at <a >Big Sky Ski Packages</a>
Comment By local, long term resident, 11-24-09"Moonlight took a loan of $100 million from Lehman Bros. in the fall of 2007 with the intention of quickly selling the resort."
This sentence alone is indicative of the greed and get rich attitudes that have infested our area, state and country for decades. While I empathize with all the hard working people who will loose employment, the top priority should be to pay those who provided services and are owed. High rollers play with fire and, as we've witnessed over the last year or so, take the risk of getting burned. Problem is, they take a lot of good folks down with them. Let it die - maybe a few griz & wolves will reclaim it as their own.
I cannot speak for Tamarack directly, but locals will fight harder for moonlight than for most other resorts. The general feeling of home that surrounds MLB is un-rivaled at other ski villages. MLB lacks the bro-bra's, snobs, and crowds that make most resorts unbearable. It would be a shame to see MLB's laid-back, welcoming mystique (that is natural to Montana) be replaced with new up-tight corporate management and employees that will sacrifice customer service for their bottom line.
RUgreen, don't hate the player, hate the game. Regardless of what happens in the upcoming court proceedings with MLB and Lehman, the resort will operate at some point, on someone's dime. Anyone that knows anything about skiing, knows that the terrain off the north slope of Lone Peak is too to be left to the griz and wolves. Someone will pay big money to operate and sell tickets for those lifts. Let's all say a prayer to Uler, god of Snow and rocky mountain real-estate, that Boyne doesn't take the reigns...
By RUgreen, 11-20-09
I told you so two months ago--Moonlight will be shuttered just like Tamarack Resort in Idaho.
Yep, you told us so.
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