Poor Little Rich Club Lives On
CrossHarbor Wins Battle for Yellowstone Club
The posh private club near Big Sky gets a new lease on life following a harrowing journey through bankruptcy court.By Jonathan Weber, 5-18-09
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Marking the beginning of the end of a great Western soap opera, CrossHarbor Capital Partners today won a bitter battle for ownership of the bankrupt Yellowstone Club after reaching a settlement agreement with lender Credit Suisse.
The deal, which came in the wake of a disputed auction of the club late last week and was signed only minutes before today’s court hearing, calls for CrossHarbor to pay $115 million in cash and debt for the club, in addition to providing a $15 million fund for trade creditors and up to $75 million in working capital going forward. The Credit Suisse lender group, which is owed $310 million, will get a new note for $80 million and could collect additional funds from a so-called “liquidating trust” and from the sale of the Chateau de Farcheville in France.
All unsecured creditors, with the exception of some members with special claims, should get paid in full under the deal.
U.S. Bankruptcy Judge Ralph B. Kirscher approved the settlement today, though final approval of the club’s Chapter 11 bankruptcy reorganization, which will incorporate the settlement, will probably not happen for another week as a variety of comparatively minor details are resolved.
Credit Suisse, which has waged a fierce and sometimes quixotic battle to gain control of the club on behalf of its lender group since the bankruptcy filing last fall, was under heavy pressure to cut a deal after Judge Kirscher ruled last week that bank’s behavior in brokering the loan was “predatory” and “shocked the conscience” of the court. The ruling “subordinated” the Credit Suisse lender group’s secured claim to those of unsecured creditors and thus took away the leverage Credit Suisse would normally have had as the first lien holder on the club’s assets.
The Judge’s ruling against Credit Suisse, which came following a bankruptcy court trial known as an adversary proceeding, was only a partial and interim ruling. Under the settlement, the claims against Credit Suisse will be dropped, and thus the bank might escape what would likely be a highly negative final ruling in that case.
The settlement does not, however, include Tim Blixseth, who was also on trial in the adversary proceeding for breach of fiduciary duty and fraudulent transfers in connection with the original $375 million Credit Suisse loan. Blixseth now faces a number of legal claims - from the club, from Credit Suisse, from the minority shareholders in the club, and possibly from his ex-wife Edra - in connection with his transfer of money and assets out of the club.
“I’m extremely happy for the club,” said CrossHarbor principal Sam Byrne after the hearing Monday. “I think it’s the right thing for the club and I think Credit Suisse recognizes that.”
“I’m going to get some sleep,” he added.
Edra Blixseth, who is nominally the owner of the club but will be out of the picture once the sale to CrossHarbor is complete, called the outcome “bittersweet” for her personally but a good thing for the club.
“The whole goal was to get the Yellowstone Club on the right footing for the members and the employees and the community, and that has happened,” she said.
Edra Blixseth is now in personal bankruptcy and owes more than $100 million to a number of banks and other creditors. “The personal toll on me was not at all what I expected,” she added. “I was not expecting the personal attacks from Tim [Blixseth] and Michael Flynn [Tim Blixseth’s lawyer].”
Tim Blixseth and Flynn have in alleged that the club’s bankruptcy was Edra’s fault and that she had conspired with Sam Byrne to get the club on the cheap.
Byrne and CrossHarbor appear to have broad support from the club members, who have also been invited to participate as financial investors in the CrossHarbor deal. Jonathan Alter, an attorney representing a large group of members, said the members were “extremely satisfied” with the outcome, and especially that it assured that the member contracts remain in place and that all vendor and employee claims will be paid.
The settlement agreement also included giving Credit Suisse and its noteholders the right to co-invest alongside CrossHarbor.
The liquidating trust that is part of the plan will be responsible for collecting any outstanding money and paying off claims according to priority. The funds will apparently come mainly from any money that can be collected from Tim Blixseth, who took $209 million from the Credit Suisse loan as a “loan” to BGI, the family holding company. While responsibility for the BGI loans was transfered to Edra Blixseth as part of the couple’s divorce settlement, Tim Blixseth could be still held liable, especially if Judge Kirscher rules against him in the adversary proceeding. The trust could also collect money from the sale of non-core assets, including a golf property in Scotland.
The French chateau, which itself is apparently in bankruptcy proceedings in France, will not be part of the liquidating trust but rather will be given directly to Credit Suisse as part of the settlement.
The money for vendors and other trade creditors will include about $2 million from the sale proceeds and $15 million from the trade creditor fund. For the money coming from the liquidating trust, the first $2 million will also go to unsecured creditors, the next $15 million will pay back the trade creditor fund, and the $10 million after that will go to unsecured claims that are not trade claims - mainly claims from people who joined the failed Yellowstone Club World, from Greg Lemond and his associates (who are still owed money from a prior legal settlement), and possible from the minority “B” shareholders. Only then will the Credit Suisse group get any more money.
The club will now be run by CrossHarbor in partnership with Discovery Land Co., a developer of exclusive clubs around the country. Resolution of the bankruptcy should remove the uncertainty that has helped to freeze lot and membership sales, though it remains to be seen if and when demand might recover. Membership at what is touted as the world’s only private ski club has in the past required a $350,000 deposit, plus $18,000 a year in dues, and lots start at about $1.5 million.
Sam Byrne, whose firm runs a group of real estate investment and distressed asset funds, was initially a member of the club before he began to invest in development projects there, and he ultimately tried to buy the club from Tim Blixseth. His development plan includes more focus on condo development in the base area, and more skiing on one of the peaks at the 13,500 acre property.
For more coverage of the Yellowstone Club bankruptcy and more articles about the collapse of the high-end resort economy in the West, click here or see a list of related stories below:
- Citing “Naked Greed,” Judge Eviscerates Credit Suisse in Yellowstone Club Case
- Yellowstone Club Bankruptcy Showdown Enters the Home Stretch
- Yellowstone Club Auction Draws Few Bidders
- The Case Against Edra Blixseth
- Yellowstone Club: How to Go Broke on $375 Million
- Yellowstone Club: Tim Blixseth, Credit Suisse on Trial
- Bankers on Trial: Credit Suisse, the Yellowstone Club, and the Real Estate Collapse
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Comments
good luck to all of you facing more legals challenges, no resort is going to be much fun if you are spending all your time worrying about getting in front of more judges.
Thanks for good spirited debates and I admit defeat. I can not compete with a 'Win at any cost'
JW, whats this about further litigation against TB, do you know something direct from the judge n this as it sounds like you have the inside scoop? Is the judge going after TB is this what you are reporting? Please do tell as you seem to know every move of the courts and clearly I do not. Whats the future hold for TB? How about EB. clearly my sources are wrrong and yours are never wrong. Information please.
THe party is over and the FAT UGLY lady has sung the BK song for SB! I am a good ooser and well lets do whats right and support the new owner but get the club back to being private!
Best to all my fellow bloggers! I still want a run named after me or at least a EVIL drink named after me at Buck t 4 and WML.
OK, hearing is over and I have work to do updating the story.
http://online.wsj.com/article/SB124267438287731485.html
So now that the club is decided, what is the future of the trial? Did the Judge rule on the other matters? What was the decission on the Promissory notes, the famous 209m and the decissions related to TB? JW, did they state anything or was that dismissed in light of the outcome?
On the subject of TB and CS… media reports state TB paid interest and made every payment on the loan that the judge called “predatory” lending. The facts are the facts despite personal opinion... which this blog has in chorus. I would like to understand the facts. On that note, what is going on with EB’s BK? Since that is what brought this on. Through what I've read on the blogs... this is the story. People are accusing EB of some really heinous and criminal behavior. What is going on with this? When is her trial? Can someone also explain the legal financial documents EB signed, at her divorce, that were produced in court during the TB CS trial? It would be great to get the facts about this in a well reported story than innuendos on a blog site.
So Nancy, are you really tha middle aged SR gal we love to call BHB, from the Klampets? The club beongs to CH, lets see them preform. As i wrote i already admitted defeat and wished them well and mot of all to pay the employees and local contractors and then pull out the check book for the 75m in working capital.
Nancy, since you know so much, can you tell me what did the judge say about the trial? When is the verdict. Judge seems to be the state hero and served up a real winnner! so this must mean he assumes CS is guilty on all fronts of the predator loan and that TB is in the clear? I can't see how thei Judge could now rule on Fiducciary since he wrote the riot act on TB and EB but what are you hearing between the bon bons and CH updates?
Fully agree, JW did a great job and this truly is the number one place to get updates on the club and lively debates. By the way, nice piece about Edra at Christmas throwing her staff out of PC and not paying them. JW did a great call in interview for that story and we hope you air the results on TV tonight and carry the live coverage of Edra being escourted out of Sam Byrne's new Golf Estate. Well done to both of you!
now the members can make sure their wishes on staff and the culture of the club are heard and respected. that will be the key for YC as it starts its new life and looks to protect the great people who work there and have perservered through all the muck.
there will be an article in the NY Times in June covering much more of the EB/TB story, so that is something we can all look forward to reading. after this saga the book and movie rights are probably soon to follow.
what was clear through the process was that the Judge really took the ongoing viability of the club as a primary concern. that is the idea behind BK after all - to restructure debt, obligations, so that the entity can continue going forward. seems like he did an excellent job of that, looking after as many of the constituents as he could. CS holding a note on the club with CH in charge - certainly that will increase their chances of getting paid some of their money back. DLC - that is where SB and the member voices come in as to what kind of club YC will be.
many folks were blogging yesterday about how this concept is not viable. you may WISH that is so, but of all the clubs in the U.S., this one is unique and really offers something that no other resort or club can offer. with professional management, YC will continue to be successful.
remember - even with TB's erratic leadership, the club sold over $500M of real estate - less than half of what is available. the infrastructure in the ground now is being acquired at a very good price. it seems to me that CH/DLC will be able to do much at least as well over the next few years.
BH - in the movie, you should get to play yourself. good fun.
going forward!
looking at the proceedings, i am certain the Judge wanted CS and CH to work together. the message was probably something along the lines that CH/DLC offered the best management for the club's development and operations, and that if CS wanted to recoup any meaningful amount of its outstanding notes, it needed to structure a relationship with CH. the bankruptcy trial judges have have only one thing in mind - to get the entity, if possible, on an operational basis again. to that end, they really drive toward settlements.
on the EB/TB side - that appears to be headed for civil/criminal court. i would think most of the issues there are not even YC issues, once the bankruptcy restructuring and claims are settled. if TB really made the payments to CS, then all that does is make CS more comfortable settling with CH and working with them going forward. not sure if that really means anything in the further adversarial proceedings that will now take place.
So Blockhead, are you going to continue to do everything in your power to help Tim head for the hills to avoid getting his dirty assets reclaimed?
Watch Timmy run.
PS I also think Tim's YC Cross Harbor introductory letter may get a personal signature from Sam himself :)
PPS also Blockhead remember if Credit Suisse sue Tim Blixseth you owe me an island.
How much of those sales were to end users? I don't think it's fair to count sales to developers who had to pick up multiple memberships that are then included in the cost of the mega-house or condo as actual sales of club property. Someone does have to eventually buy those right? Or is one of the new directions going to be timeshares and rentals? That might change the exclusive tone you crave there.
What it offers is fantasy. Like Mr. Roarke and Fantasy Island kind of fantasy. I'm guessing you own more than one house in there, and are trying to stay positive on your future. I'm sorry for you, you are the one wishing.
Also, acquiring land and infrastructure at well below replacement cost allows the land basis to be reclocked to sell at a lower price point, true. But if you are an existing owner or member will you be happy to see the market flooded with developer lots or cheaper per-sf product that are well below your pre-economic meltdown basis? That becomes a political problem for CH, and changes the demographic and socioeconomic profile of the club. If members have so much money that they don't care about their values, or don't mind rubbing shoulders with the "lower" socioeconomic classes to whom YC has suddenly become accessible, then I guess it's fine.
I don't have any axe to grind or "wish" that YC won't succeed at all. I have no vested interest in the outcome either way. I don't begrudge the wealthy their wealth. I am empathetic to the local community. I just think it is wishful thinking to believe that glory days of the past are coming back.
To be honest, I don't think it would bother most members if the average square footage of the homes at YC was lowered, if prices were in an area that attracted second home owners and not third and fourth homeowners, and if all forms of elitism at the club were eliminated. The real value of the homes at YC should be based on the family, friends and memories within them.
the words of Blockhead, the pathology of
Tim Blixseth. A case--in or out of court.
p.s. Ya gotta pay your dues if ya wanna
sing the blues. Start singin' Tim...
Looks like EB and TB will be spending many more years in various court proceedings. YCers can only pray that they don't get dragged into that legal mess any longer. Time for YCers to enjoy their club!
What happened to the 232 million dollar secured claim in favor the CS’s bond holders granted by the judge in this process? Did CS settle to protect its name after the judge interim order ruled that the CS loan was predatory and “shocked the conscious of the court.”
??? about CS/TB lawsuit…
What will the judge do after his interim ruling? How does this affect all the other CS loans mentioned in court? How many of these loans did CS make?
??? EB BK…
Does anyone know what is going on here? There are very serious allegations being made. Not just here on the blogs but by employees, banks, personal friends, local businesses in MT/CA, etc. When is this trial scheduled?
With a total debt of 310 meeelion it seems CH only got 30% off,
not that good of deal ?? Doesnt seem the best of deals to me.
You YC'ers are lucky CS didnt get it because they are not a resort company.
It would not have been pretty with a pissed off management like them. When in doubt shutter out is their policy.
Lots of bad press here in Europe. The Swiss Government is starting to ask a lot of "unofficial" questions regarding how CS is investing its pension funds that it cartakes on behalf of its citizens. Its going to get a lot uglier than annybody thought. I would gather that the YC is safe but Teflon Tim and "plastic bubblehead" are not.
Off to Cyprus to dine with some old freinds
Deep Throat
I understand that CH has promised in their bid to set aside money for improvements. Can anyone tell me how much that is, what they plan on doing with it and when they will get the ball rolling>
There are lots of local people who are ready to get working!
In any case, the "gravy train" of spending on capital improvements isn't likely to be renewed until CH can get the YC reputation turned around and begin to bring in new members. New members will want to have proof that CH can make this work and provide a stable, family environment for years to come. Best wishes to CH, the YC members, YC employees and YC suppliers. You've all invested a lot over the years and deserve to see this turn out well.
Dave D
Given this info, why then would a judge rule in favor of a lesser bid, if not for one of two scenerios.
1. He is on the dole
2. He wanted to look good to the locals
Of course he could be stupid, but I will give him the benefit of the doubt since he is from MT.
Them thar grapes is purdy sour....
CH will try to operate YC in the "Real World." For starters, the annual operating budget will be slightly more than half of the previous budget. The trick will be to make surgical strikes on the cost side that won't be felt in the service levels...
The question still however has not been adequately answered. Why was SB's loan to EB, any less predatory than CH to YC? The reality is that while many people on this blog had some miraculous "foresight" regarding the real estate market in 2005, the market did continue to run for another two years before imploding. One could easily argue that overvaluation was not a given in 2005. On the other hand, SB was intimately involved in Edra's affairs/finances up until the 11th hour. He knew in September of '08 that she had no way of paying back the $35m loan, so to "float the club" for another season was a risk free decision. He used factual and proprietary information to not only get control of the YC, but PC as well. In the meantime CS and every other financial institution were in lockdown due to the credit markets. To say that CS simply did not "want" to save the club, is naive.
Therefore, your answer is incorrect. The judge could not in all honesty award the winning bid to the LOWEST bidder based on this theory. I truly believe that any open minded person who looks at the facts as they pertain to SB and CH, would come to the immediate conclusion that SB hands down wins the award for the most predatory business practice in this entire saga…Which means that the judge is either stupid, or on the take.
Seeing as how we haven't seen bh's 3 pager yet, could he please be booted once and for all? He won't give his identity like he said he would and he is nothing but pointless drivvle and has proven that he knows little about the real issues at hand. Unless he can tell us where all the money that tb has and what tb is going to do with it. Maybe tb will donate it to the Red Cross. LMAO!!! Remember, "the money is in the bank!" Luckily we have more timisms to bat around. Seriously, enough with bh and all his aliases.
Imagine, a self proclaimed billionaire borrowing $375 million. That doesn't even make sense. Good riddance bh. Your gravy train has left town once and for all. Applications are probably being accepted at yc and sr.
As for lowest bidder, I think the shortfall after smaller creditors are paid determines the haircut for Credit Suisse. Pure speculation here but I think the judge doesn't mind Credit Suisse facing the consequences of it's loans and also let them chase Tim Blixseth and his YCW spoils. Credit Suisse and Tim can batte it out in court until Mike Flynns heart/wallet is content now, but it shouldn't affect the Yellowstone Club.
Blockhead had clearly taken sides, as have you. Why is his drivel any more than yours?
In the end, you all traded an uneducated timber salesman who hated his wife, for an Ivy League vulture capitalist. Don’t get me wrong, as I aspire to be closer to SB than TB, but let’s call a spade a spade.
Besides whining about the local fallout, the number of zeros and her obvious distaste for all things Blixseth, Nancy has failed to adequately answer my question.
I am starting feel like you all failed to think about this.
I can only speak to what I have read, but it seems to me that SB had made an offer for the YC in January of 2008, only to be stopped by the emergence of another bidder. And that in the escalating divorce battle, Sam Byrne began to play both sides of the family. First he was in "Camp Tim". Then he switched to "Camp Edra". Is it such a stretch to believe BOTH Tim and Edra's accusations that Sam Byrne had intended to BK the YC from the moment that he saw the opportunity posed by the infighting? Add this to the “opportunistic” loan that Sam gave Edra last summer, and I fail to see how ANY neutral source could come to a different conclusion.
My guess is that if Credit Suisse had been privy to EB’s finances as was Sam, they too might have offered $35m plus another season of operating funds in exchange for PC and clear title to the YC. Of course, as the administrator of the bonds, that is not solely their call.
Still, I believe that you have come the closest to answering my question. Like someone mentioned many blogs before…The judge handed down some old fashioned Montana justice. It may not be right, or fair, or even reasonable, but for the time being the people of Montana can at least “feel” like justice was done.
JW, thanks for keeping many of us in the loop that have been and will be affected by this. And good luck to SB/CH going forward.
January 2008 - there was no other bidder. that only other bidder or potential bidder was gone end of 2007. the reason SB pulled out was due to TB's lack of willingness to provide adequate financial diligence, even after CH/SB spent over $4M trying to recreate several years of YC finances.
Did SB play TB/EB? perhaps. will have to see what happens over time between EB and SB. my suspiscion is that EB is far more welcome at YC in the future than TB.
Was CS's loan predatory? the reason the Judge ruled it so was because they issued the loan with virtually no diligence and took a significant fee that was immediate income and profit to the partners running that group at CS. CH's loan to EB may have been opportunistic in the extreme, but CH did not collect a loan generation fee that was millions of current income. Also, EB asked SB/CH for the loan after the french chateau sale collapsed. Pretty different circumstances to me.
TB was great for the creation and launch of YC. but he was his own worst enemy the last 5 years.
How do you think CH/SB make money? They are a fund!!! Yes, clearly SB took no compensation for his year long effort in acquiring the YC. Truly amazing.
My stockbroker also charges 2%.. Maybe I should sue...In MT court of course.
BS, Sam collected 3 percent on the loan to Edra up front: You want a copy of the loan you ego maniac§ Thats 1m in up front fees. It was predatory. Do not worry, a major lawsuit is coming against Edra and Cross Harbor and this is only beginning. Rest not my little friends, the 3 pager is coming and you should read it and freedom of speach is a good thing, if not we will buy a advertisement in the Bozeman Cronicle to al read:
So nancy; who the heck are you: Are you that middle aged lady up at sunrise ridge? Tell all of us so we can identify you and i will identify myself. In fact why not go to a chat rom for a private conversation? I am more than game if you are?
CH charges its investors a MGMT fee on funds under management. its real profit comes from its gains on its investments where it takes a significant share of the gains and divides that among its partners.
EB asked for CH to help on the loan against PC...because of another deal that was "done" falling apart. its important - she asked for help and there was no one else around. not at a scale that mattered.
BH - i hope that the next 3 pages you write are more accurate than the last 30 or so posts. otherwise we will have to set up a separate "YC Fantasy" blog for you. Maybe we can follow the spriit of Tolkien such as
"the fellowship of the conspiracy"
"the two towers of greed and concompetence"
"the return of the King (TB)" (well, at least not yet - but that is the wonder of Fantasy writing)
you may even get your own genre - slanderous fantasy.
- that Yellowstone Club World deliberately lied to Forbes magazine in a written email claiming 25 initial memberships had been sold.
- are you personally owed any money by Edra Blixseth
I drove past PC last night at sundown, parked the car and sang to my self "kum by yah" and thought of you. Truly a moment in time.
No moving vans, sherrif deputies yet or so says the locals.
Looking forward to your 3 pager.
Dave D
"In a May 2006 e-mail to a FORBES writer Blixseth gushed that he'd "sold out" the 25 charter memberships in one day. "I like it when the idea is validated by purchases," he wrote."
...
"Yellowstone Club World, in fact, never took off. Membership sales were halted in late 2006."
http://www.forbes.com/forbes/2008/0721/032.html
Deep Throat
Because YC is only part of the picture. These kind of
ugly situations come to be as a result of fraudulent LAND
EXCHANGES that power brokers like Blixseth use to steal land
and tax dollars from the Public.
Be sentinels for your Public Lands in the NW, and don't let the atrocities continue.
A ship's captain can hand over to a deck hand in panic, but Tim Blixseth very clearly captained this titanic until his cowardly bailout.
I'm guessing there will be an emerald cay property for 99% discount provided it's short settlement unmarked Mexican pesos available any day now.
reminder to me that no one is to be trusted when it comes to
"business." Personally, I find it all very depressing and am
quite amazed at how "ugly" and mean-spirited some people can be.
It seems many are actually thriving on this sad saga; are full of venom and sadly enough, deriving a great deal of pleasure from this most unfortunate situation.
In the final analysis it all comes down to one word--GREED.
Human nature, maybe? People are angry. In a lot of cases they have been taken advantage of and let down by those in power with great financial resources, but without an accompanying sense of moral responsibility. People feel some sense of vindication when the mighty fall, particularly those that have pontificated from on high, often cultivating some public benevolent image and persona that is a lie to cover up less than honorable private dealings. Or, others that have acted arrogantly and abusive of their station, aided and abetted by those around them that want to ride the gravy train as long as possible.
Most people want to be inspired, led, to believe in something good. And when those we want to believe in let us down by being exposed as greedy, self-absorbed, flawed and foibled human beings, the disappointment is profound. The last 8 months have been replete with let downs by the leaders of our financial system and the regulators that were supposed to oversee it. Our economic system and its long term viability is constitutes the inextricable underpinnings of our ability to sustain our way of life and political system.
Those that disabused power and wealth for their own account, in both the private and public sectors, put their own gluttony and comfort ahead of the long-term interests of all Americans. They sold us out by propagating financial systems that they knew were not sustainable, and pretended the emperor had clothes to make as much as they could before the bottom fell out.
So, call it Schadenfreude, or mean-spiritedness, or whatever. I think at the root of it is people's bitter disappointment with the failings of people that we should have been able to look up to and not sell us all down the river.
I understand your pessimism given the amount of poor news in the media. However, I disagree and have a different perception of how and where money will be spent over the next decade. If in fact the economy has a slower-than-anticipated recovery and there is significant degredation of high net worth people that doesn't necessarily signify a poor decision to invest in a unique development such as Yellowstone Club. People behave in unpredictable ways, but there are many that will choose to reinvent their lifestyles as the economy continues to be sluggish. At some point it becomes unneccesarily stressfull for some people to attempt to increase their net worth in a troubled economy. You'll see some that choose to throw up their arms and walk away looking for a place to focus on their families and preserve their sanity rather than chase after the elusive dollar. Montana is a good place for that and a nice place to develop your new game plan. Not everyone will choose to or can afford to purchase in Yellowstone Club, but it doesn't take very many to make the club successful. You can get a place in Yellowstone Club for under $5 million right now and you are on the hill and part of something that isn't available anywhere else. You can't get much in many resort areas for that price. It's important not to underestimate the uniqueness of Montana and the unpredictability of how and where people spend their money in uncertain times. Only time will tell for certain, but I'm quite optimistic that we are on the cusp of a run on the real estate market in southwest Montana. I'm not saying tomorrow is the day that everything turns around, but my prediction is about 12 months from now it will be irrefutably improved. The bottom line is that Cross Harbor has already invested a lot of money in the club and needs to invest more in order to protect their past investment. It is a risky business, but they will either look brilliant or brainless in 10 years. There is no benefit in being a pessimist. Go get some fresh air and sunshine and find a way to make whatever your dream is work for you.
Your otherwise fine publication devotes far too much space to the Yellowstone Club. Enough already! Surely there are other important issues in the region to report on. Broaden your definition of what the new west is."
\\Sarcasm\\ Because like ya know, in a recession, hundreds of millions of dollars going into the local economy only matters if it comes from Obama. Dude. \\End Sarcasm\\
Your name alone says volumes of how highly you think of yourself. I don't think you get what has happened in America.
The anger, right now, is actually subdued. But it will rise, a little at a time, and either be appeased (and not by Obama, dude of no consequence) or not.
The people who invest in the Yellowstone Club, as members or member/developers, can pontificate all they want about how losing 30% of their mythical net worth has humbled them into realizing what's really important. But it doesn't mean crap to the carpenter who lives hand to mouth and hasn't been paid for 6 months.
The trickle down of a recession grows in magnitude the lower it goes. We don't lose one of our vacation homes, we lose our only home. And it doesn't sit well. And it doesn't make us all optimistic about when the wealthy will patronize us again with their benevolence because they want to spend quality time now with the kids they haven't watched grow up.
Cross Harbor isn't going to turn anything around. All that has been resolved is where Sam And Friends will ski next year.
Do I want to follow my dream? Hell ya. Can I afford to move to southern Montana? Hell no. I can't even afford to move out of my mother's basement, let alone into a bargain priced $5mil home. I didn't make irresponsible investments, I didn't buy a house I couldn't afford, I didn't max out my credit and then ask for more. But I am suffering the consequence of all who did. Especially those in the caste of eligibility for Yellowstone Club membership.
I'm not sure I'd want to be in that family atmosphere with my kids, anyway. I wouldn't want them thinking that quality of experience comes with the exclusivity of being only with those in the same income bracket.
Well, I've said my piece. I'm done now with following this soap opera. I have no sympathy for anyone involved. It's almost been like a symbolic feeding frenzy, and the worst hasn't even come.
Man, you are so RIGHT ON. Thank you for saying it, and putting it just like you did. Perfect.
You write like you speak, OO. I hope you use your skill to do good.
And good luck to us all.
Here's to the beauty of Montana. Cheers!
Once again, no accountability. Maybe you live hand to mouth out of mom's basement because YOU chose that career. YOU decided not to get an education. YOU decided to live that lifestyle. Maybe too much weed, or too many dead shows, or maybe the anti-establishment you fostered living at such a high altitude?
Most of the motley crew out there can probably out-(hot tub)ski the elites anyway! OPEN IT UP. Let the Montana folk that love the (hot tub) mountain offer up their respect. I'll bet the (hot tub)mountain is yearning for it after being "loved" by Blixseth!
I got an idea Mooch, why don't you go buy your own (hot tub).
As for Sideline; no economic situation is improved by removing money from exchange. Except communism as taught in American institutions of higher learning. In the real world, people with money, pay people that know what they are doing, to do things they can't or don't want to. Build houses, build furniture, take care of the place and the like. Those people use the money to buy food, pay their mortgage, upgrade their vehicles and move their looser kids out the basement.
From "Educator"? Possibly Blixseth's high school teacher, which is the extent of his education outside what he learned selling snake oil.
"No one of Consequence?" I ski uphill and soak in a horse trough.
People pay people to do other things besides build houses and be their servants= an economy that worked well enough before deregulation and the housing bubble. We pay people to grow our wheat and grind our flour. We pay our government to protect and steward our lands. We pay for things we CAN'T do for ourselves, but in Montana, we can do most of it by ourselves, and prefer to. It may not make enough money to "get out of the basement", but I'll bet if Sideline's mom needs help, he'll be right there to lend a hand.
It ain't all about lots of money. It's about livin' with honor. The folks with money think they deserve respect because of it. Some realize that it only happens on the backs of others, and pay their due. For many, it is hard for them to come to terms with what they owe. This YC story, a case in point.
Dear Educator,
I am a female ivy league graduate, but I chose to ... wait for it ... become an elementary teacher in a blue collar town. I take full responsibility for that crazy choice.
Along with falling in love with, and choosing to legally marry, a carpenter. Wow, what a radical I am.
I grew up in Greenwich, Connecticut. I could tap daddy for a house in southern Montana, but I'd rather earn it myself.
I love to ski, but I haven't gotten high in over 25 years.
I harbor no delusions that there is "need" for the wealthy. I just don't want to hear them crying in their lattes about how they had to let their personal assistant go and now they can't figure out their blackberry.
This battle has been all about ego. I would have suggested the judge telling both sides to just whip 'em out, he'll get a ruler and the biggest d**k wins.
Maybe he did.
"I harbor no delusions that there is "need" for the wealthy. I just don't want to hear them crying in their lattes about how they had to let their personal assistant go and now they can't figure out their blackberry."
Just as I thought. Learned economic theory at a university in the states. Also a teacher and undoubtedly a member of the teachers union and moveon.org. Just taking a stab at your religious (the above quote indicates “a dogmatic belief that is exempt from rational discussion” which is my favorite definition of religion) and political indoctrination. A Sam Byrne or a Bill Gates didn't get where they are by having someone else keep track of what balls are in the air or running their crackberry.
As someone that bargains for a dipper from the public trough, try to empathize with the truck drivers, pipe fitters, landscapers, roofers, rockers, framers, etc, etc, who have to work for a leaving.
The Club infused more money into this part of the world then anything short of building and staffing an air base with a Peacekeeper missile wing. The people that earned that money used it for everything from food and clothes (which I’m fairly sure they didn’t all make themselves) to movies, dinners out and coffee huts. The Club goes away and all those people start getting hurt. The Judge understood that and refused to allow it to happen. Only a Leninist would consider putting 5000 some odd people out of a job, for a dogmatic belief.
I can honestly say that I don’t care if someone made their dough from baseball, software, music, the lottery or backstabbing 12 people on an island. How you treat people when you can’t be censured for acting badly is what I go by. Your condescension and posturing is much worse that anything I’ve ever heard of from 99 percent of the members and managers at the Club.
I'm not buying that donkey.
Wrong, I learned no economic theory at university. In fact, one of my first thoughts upon arrival there was that I had nothing in common with those liberal whiners. What I know I learned from my father, who worked his way through college to become very happily situated financially. No hand outs given to him, no hand outs given to me, except one: college. He is extremely proud of me for what I have done with my education. Growing up poor, it always bothered him that people associate lack of money with lack of intelligence.
I'm not a member of any union, nor would I want to be.
Don't know what moveon.org is, but I recall it had something to do with Dean when he was running for president.
I have no religious beliefs. Religion is for people who are frightened by the unknown.
I don't believe everyone gets a trophy either.
Don't care for Lenin, or Lennon. It's easy to say everyone should have their fair share when you have plenty.
When you work for your money, you don't appreciate anyone who's on the dole.
And I think you mean "work for a living", not "work for a leaving."
I'm happy to hear so many will have employment now. I hope they also have housing, perhaps even something nicer than 6 people crammed into a 2-bedroom. And that they can live in Big Sky, and not take the daily drive through the canyon of death, that current locals would like their highschool children to no longer have to take.
You are right. I have been saving and planning. And I am patiently waiting it out in the basement while the bank decides whether it will let go of it's subsidized funds to allow me to buy a 50 acre organic farm. A ski home would be wonderful, but a home powered by solar and wind that produces food for my family and others (via sales and giving it to food banks) seemed a better choice.
Also, by "on the dole" I meant those that abuse the system, not the many, many, now that truly need it.
But just wondering what people think that this means for the future of Big Sky, Spanish Peaks and Moonlight?
all will face challenges over the near to mid term. Leverage, combined with depreciating assets is hitting everyone's balance sheets. Expect no construction and shoestring operating budgets.
Sideline, good luck with that organic farm. Let me know when you begin production, I'd love some organic veggies!
Me neither.
The socialism/communism card is a predictable dart to throw at arguments for some ethical accountability in business. Apparently, free enterprise can't police itself due to human nature. So it needs governmental restraint. Sad fact of life.
storymilldawg is 100% capitalist, believes in the free market, property rights, and freedom of everything. Believe me, I worry every day about TARPs and govt ownership/nationalization of banks and major industries in this country.
But how about capitialist economics married to some basic moral premise and social responsibility? We have gotten way out over our ski tips as a society with self-interest and a sense of entitlement---at both ends of the income spectrum. To make this thing work, this country and our system surviving ANOTHER 250 years, we better get our act together.
It's disturbing to think that someone would actually scorn an individual's choice or predisposition to become a skilled carpenter, a drywaller, or even to toil as a laborer to put food on the table is any less noble than a software magnate or venture capitalist. I admire the sidelineobservers of the world that make conscious choices based on values that nurture the soul.
Agree with GC. Time for a great Memorial Day weekend. But I won't forget to quietly reflect on the sacrifice of those that gave it all for our way of life since the Revolution.
Shady deals put a ritzy Montana ski resort at risk. Then along came a common-sense judge.
by Jonathan Weber
Greed, Bankruptcy, and the Super Rich
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A private ski resort created by a timber baron in the rugged mountains of Montana would hardly seem to be a global bellwether for anything, except perhaps the evolving preferences of the very rich.
Yet the dramatic bankruptcy of the Yellowstone Club, the events that precipitated it, and the way it has been resolved show with unusual clarity the good, bad, and ugly of our current economic predicament. And the club’s future will be a leading indicator of the economic zeitgeist in the age of Obama.
Let’s start with the bad. In 2005, investment bank Credit Suisse was aggressively peddling resort loans, offering developers the opportunity to line their own pockets with the proceeds and offering institutional investors high-yield loan products whose risks were vastly underestimated.
Tim Blixseth, founder and dominant shareholder of the Yellowstone Club, was among the many who found the money irresistible. First he was going to take $150 million. Take a little more, urged the investment bank. Hell, take a lot more. And he did, finally closing on a $375 million loan, and, as explicitly permitted in the loan agreement, immediately transferring $209 million of it to his personal accounts.
When he and Jeff Barcy, the lead Credit Suisse banker, couldn’t agree on the fee, they flipped a coin. (Blixseth won, and Barcy got 2 percent instead of 3 percent.) Appraisals? Cash-flow projections? The ability of the borrower to re-pay? Ah, not to worry, these small details didn’t require much attention, because Credit Suisse didn’t have any money at risk anyway. The loan would be packaged and sold as part of so-called collateralized loan obligations, putting possible future problems on the shoulders of institutional investors like hedge funds and pension funds.
Credit Suisse did more than half-a-dozen resort deals like this, totaling close to $3 billion. How many other loans of this nature were made between 2002 and 2006, by most of the biggest names in banking? (Answer: a lot.)
Now we get to the ugly: The club had minority shareholders, including cycling great Greg LeMond, who thought they should get a share of the windfall. They sued the club and Blixseth, who finally settled for $38 million (though the judgment was never fully paid).
Blixseth, always looking for ways to expand his reach, hatched a new plan to lure the über-rich. Yellowstone Club World would offer elaborate vacation timeshares at exotic overseas properties, including castles and private islands bought with the Credit Suisse loan proceeds. But that plan quickly disintegrated, leaving Blixweth with a pile of expensive (and soon all but unsellable) assets.
By 2007, the club was facing serious cash flow problems, stemming from the heavy debt service on the Credit Suisse loan, profligate spending, and erratic management. Blixseth decided to sell the property, but the deal fell through. Tim and Edra Blixseth, meanwhile, were getting a divorce. They fought it out in court even as they continued to spend lavishly—seemingly oblivious to that fact that their empire was on the brink of collapse. Edra got the club in the divorce, and with it the huge debt load.
When the real estate meltdown hit, bankruptcy was only a matter of time, and a Chapter 11 filing came last November.
Credit Suisse, still the agent for the outstanding $310 million on the loan, responded by calling the lawyers. The Yellowstone Club bankruptcy was an evil conspiracy, argued the men from Skadden Arps, a plot by Edra Blixseth and Sam Byrne (the private equity investor who had tried to buy the club in early 2008). And besides, they argued, we’re the first-lien holder! We have our rights! Don’t stand in our way or we will lawyer you to the death!
But then, surprisingly, came the good, mainly in the form of an unassuming Montana bankruptcy judge named Ralph Kirscher. When Credit Suisse floated an interim funding plan that would involve “mothballing” the club—and thus throwing hundreds out of work and diminishing the chances of the tradesmen getting paid—Kirscher rejected it.
When the club’s Unsecured Creditors Committee sued Credit Suisse for “fraudulent transfer” on the loan—a move most lawyers viewed as risky bordering on reckless—the judge all but dared the parties to take it to trial. Credit Suisse and Skadden took him up on it, and Tim Blixseth, an unnamed defendant in the original lawsuit, filed his own legal action against the creditors and the club.
The trial was quite a spectacle. Under Kirscher’s firm hand, the bankruptcy process compressed into weeks complex litigation that would normally take years. Kirscher, feeling pressure to make a decision and clear the way for an auction of the club, issued a partial ruling that minced no words about Credit Suisse’s behavior, blasting the bank for acting out of “naked greed” and making a “predatory” loan with total disregard for the consequences. He stripped Credit Suisse of its first lien position, a rare act in bankruptcy court.
Cleverly, though, Kirscher stopped short of voiding the loan entirely, and so Credit Suisse retained the right to use the outstanding debt as part of a bid for the club at auction. Sam Byrne and his firm, CrossHarbor Capital, already owned a lot of property at the club and had provided interim financing for the bankruptcy; they were the only other bidder. Finally, Credit Suisse agreed to settle (for an $80 million note and some other considerations), and Byrne will buy the Yellowstone Club for $115 million.
The settlement calls for Kirscher to take back all those mean things he said about the bank’s behavior. But the unsecured creditors will get their money. The big guys with the secured position lose almost almost everything, and the little guys get paid in full. How often does that happen in bankruptcy court?
Note to bankruptcy judges around the country: There can be rough justice in this tidal-wave of toxic asset workouts, even if you have to stretch the precedents a little.
The question now, though, for both the big guys (Sam Byrne and CrossHarbor Capital, and their operating partner Discovery Land Co.) and the little guys (the vendors and contractors and waitresses and lift operators of Big Sky) is whether there is a future in the ultra-high-end resort economy.
The rich will always be with us, for sure, but in what quantities? To what extent will the contraction of the financial services industry, and the more progressive tax policies of the Obama Administration, diminish the pool of people who are able or willing to spend $5 million on a ski house at the Yellowstone Club?
In short, does the financial crisis represent a mere steeper-than-usual turn of the business cycle or a more fundamental structural reset?
The answer to that question will soon be clearly visible in spectacular mountains of southwest Montana.
Jonathan Weber is the founder, publisher, and CEO of New West, a media company covering life and business in the Rocky Mountain West.
The weed of corporate greed.
The corporate skyrise rising up
The tallest, widest takes the cup
The owners filled with vanity
They raise it up for all to see
To show their worth through cement blocks
All piled up they touch their cocks
They laugh they jeer they brag its sad
Their pride has surely sent them mad
While many live on little food
Too innocent to dare intrude
On selfways ways and selfish men
No golden goose its just a hen
The eggs are foul the owners too
The chickens own not free for you
The free range eggs they truly are
The best ones you can buy by far
Their money made our money lost
We celebrate this awful cost
The moneys gone what happens next
More money made to feed this pest
Lets spray the bugs out of control
Lets share the wealth, the drinking bowl
If we leave some without a drink
It's death we give, their on the brink
Those left without will always say
We must stand and fight for a better way
And so it is we guarantee
They'll always be catastrophe
As long as selfish men do lead
They'll tie us down and make us bleed
Collect the blood and drink it down
They'll kill us all without a sound
The axe held high in hands so tight
A vicious grin on jaws that bite
They rip and tear whatever flesh
Obscuring truth with rows of mesh
As light does shine across the skies
The corpses lay covered in flies
Now moneys such a useless thing
Can't buy back life, now feel the sting
The money lost, the money paid
It's all in debt that can't be weighed
All things it buys all things it owns
It takes the flesh leaves us the bones
The corporate man thinks he owns much
Lifes mysteries he'll never touch
The many things his cash can't buy
These things are mine, for these I'de die
Author/ Andrew Scrivener
Keep up the desparation bh because it is hilarious. I'd rather you and your aliases be banished from the internet but occasionally your desparation makes me happy. If you keep your identity hidden you can still apply for jobs at yc or sr and hope to someday ride the gravy train again. It's up to you.
A bent Wallstreeter, barely kept his FUND fed,
Then one day he was loaning edra some 35m bucks,
And up come the BK plan to scare off all the trucks.
Greed that is, Montana land, Tims YC.
Well the first thing you know ol Sam's a millionaire,
Kinfolk said "sam shaft everyone away from there"
Said "YC is the place you ought to be"
So he loaded up the lease jet and stole YC.
Yellowstone Clmub, that is. Skiing and Billionaires.
Well now its time to say good by to Sam and all his cronies.
And they would like to thank you folks fer kindly droppin in.
You're all invited back a gain to this locality
To have a heapin helpin of their frauduality
Bent Wallstreeter that is. Set a spell, Take your shoes off.
Y'all come back now, y'hear?.
"..the many things his cash can't buy,
these things are mine, for these I'd die"
These things are OURS, and Montanans don't take kindly
to being bamboozled and having their land abused.
Hear, hear Judge Kirscher!
Lets see. First, I have empathy for you. If you didn’t know that the area economy is out of wack in that the cost of living is way above the local income scale, it would be a huge up hill climb. My heart goes out to you. Second, that " I hate you for what you have/do/look like" is for children. It's unattractive. If you used the same tone toward any other social group, you'd get short service.
Then your dissembling. Move on dot org. Kidding right? My kid knows what Move on is and who they shill for. If you think no one should have more than you, say so. Just remember there are people below you that can say the same. Better to say, this is where I am, and try to do better. Chess, cards, driving, heavy duty entrepreneurial drive or bball. Almost everyone has talents that can make them bank. It’s just that you are owed none of it.
Last, you missed the Lenin reference. During the purge, Lenin said (and I paraphrase) screwing over (dragging out and shooting) innocent people serves the purposes of the revolution. So, if your politics requires that everyone loose their income and go to the government with their hand out, asking for a WPA, infrastructure job, then 5000 working middle class people is a good start.
If you dislike people that make their own way, and who also give away a greater percentage of their wealth and time than anyone you know, you are going to be hating us for a bit. I wish you all the joy of it.
People who have millions should give back. Making their own way?
Well, I would say that there are some who are being financed by the people who they say should be giving them thanks. Hatred is for the wealthy--the rest of us can't afford it.
Mochsie, Nancy, Storymilldawg and sidelineobserver (the genius who spent dad's money to go to private school...for a teaching degree...and then complains because of her station in life) ALL need to stop playing the victim.
Class warefare in America is alive and well, and being fanned by the flames of the poor liberal elite.
If you read my posts with half a brain, I am not a victim, nor have I ever claimed to be. I am not one of the "liberal elite." I built my own successful company, worked for everything I have, and have done very well. I guess you could say I am "lucky", but I believe to a large extent you make your own luck. In pure economic terms, I would be considered one of the "haves."
I am also not shilling for any interest here under the guise of having some objective point of view. I have no stake whether YC thrives or fails. I don't feel compelled to defend indefensible practices or behaviors to feel better about myself or rationalize how I make my living. If you want to be one of the lemmings into the sea that believes that the business practices of the last several years that resulted in the YC type debacles are good for America and it's future, good on you. Just don't be bitter about it later when it doesn't turn out good.
by No one of consequence
And when the client sees his net worth drop from $15million to $6million and he decides to not pay that worker because he knows the worst that poor guy can do is lien the property .... then what?
When the owner of the house the guy is renting loses it because he overextended and can't flip anymore ... then what?
And when both happen at the same time ... then what?
Well, you end up having to temporarily move your family of 4 into your mother's basement while you try to get your feet back under you.
Does that clear things up for all of you who think I am some sort of slack-jawed waste of a human being preaching that the rich should fall and share the wealth and then everything would be perfect?
If you are feeling guilty for something, well, that is your fault. I am not in charge of your emotions. Maybe it makes you feel better to think someone is calling you out.
For the last time, I am not a communist, socialist or hippie.
I have had plenty, used plenty, and wasted plenty.
My husband got paid by wealthy people and we lived in a resort town.
He is owed "for services rendered" not entitlement.
I am a quiet person, but you seem to think I am shouting.
Discovery with its LA connections is chomping at the bit to get its commissions on the sale of any real estate, once they get rid of the sales team there now. Watch out for the on site parties; girls brought in and liquor flowing.
what do you mean about the parties and girls and liquor? Is YC going to turn into Hollywood in the Rockies?
This was posted over at the latest article on the YC gaining final approval:
"By Friend of Big Sky, 6-03-09
i would bet several things do and don't happen
a. DLC doesn't replace the existing sales team - what they sell in other parts of the country isn't the same as what they will be selling at YC. and the YC team has not been the problem. TB has been the problem.
b. DLC does throw some nice parties...that is probably not a crime. the reality is that the YC crowd really isn't terribly glitzy. lots of famous people have visited YC in the past and i don't think it was because TB didn't like hanging out with movie stars that the club isn't full of them - its because NO ONE CARES who they are up there and the star crowd needs to feel "special" wherever they are. plus i don't think Cross Harbor will be in the mood to offer lots of "freebies" to the crowd that is used to getting them.
c. YC is remote - Sun Valley also had the party set, but once the initial buzz wore off, the hollywood set who just wanted the "scene" found it too difficult to get to, nothing to do, blah blah blah...Hard for the "beautiful people" to get all geared up to come hang in Big Sky unless they are really there for the skiing, hiking, golf, etc.
i am sure there will be some good parties - but i don't think that is anything new at YC."
What do you think Margorie? Is DLC all that Friend of Big Sky says they are? You're a DLC member....what's the real story from someone who has experienced their "nice" parties?
lawsuits before he did Discovery. Frying pan to the fire management plus he owe hundreds of subs money now and owe will have lawsuits of his own. I know for a fact that DLC funds the parties with opm. meaning members pay in a way. sick.
watch your bills. they will be padded.