Credit Crunch Hits the New West

Tamarack Resort Owners File for Bankruptcy Protection

By Matthew Frank, 2-19-08

The majority owners of tony Tamarack Resort in west-central Idaho, owing more than $300 million to lenders and international banks, filed for bankruptcy protection in the U.S. Bankruptcy Court in Boise late last week.

According to Tamarack Resort CEO Jean-Pierre Boespflug, the Chapter 11 filing will have no impact on the resort’s day-to-day operation. “You can continue to do business with Tamarack Resort in a complete and normal way,” he said in an interview.

The two companies named in the filings are VPG Investments, Inc. and Cross Atlantic Real Estate, LLC, which own 27 and 48 percent of Tamarack Resort shares respectively. Boespflug owns Cross Atlantic Real Estate, and VPG is owned by Mexican businessman and resort co-founder Alfredo Miguel Afif.

Boespflug said the resort was counting on a $118 million dollar loan from the French bank Société Générale to complete the resort village, but the financing fell through. Société Générale is reeling from the loss of some $7 billion in a trading scandal, and banks around the world are pulling back from many types of loans in the wake of the sub-prime mortgage crisis and related problems in the finance world.

Because Tamarack did not receive the money by February 15—the day the bankruptcies were filed—the companies sought Chapter 11 bankruptcy protection to avoid foreclosure by creditor Credit Suisse, which is owed $262 million. Credit Suisse could have ended up with 75 percent ownership of the resort, and been “able to sell the company to whoever it wants,” Boespflug said.

“The filing we are doing here is so that Credit Suisse has no temptation to exercise on the pledge of their shares in Tamarack Resort,” he said. Bankruptcy filings can sometimes be, at least in part, a negotiating tactic between debtors and large creditors.

Tamarack’s troubles are an indication that luxury resort projects in the New West are not immune to the deep problems afflicting real estate and financial markets across the country. Moonlight Basin, a new resort in Montana, announced recently that it was seeking new financial partners, and even the much-ballyhooed Yellowstone Club is about to be sold.

The Tamarack bankruptcy documents give a brief but vivid glimpse into the internal financial workings of the resort, which recently announced an aggressive expansion plan including luxury condominiums, chalets and a European-style village, according to promotional material from Tamarack. The resort has a number of entities with projects under development and not all are involved in the bankruptcy.

Beyond the $262 million owed to Credit Suisse Cayman Islands (the financial firm has a lien on 24 percent of Tamarack Resort LLC), $4.1 million is owed to a company called Rotorwing of Houston, Texas; $3.2 million to Hopkins Loan Services of nearby Meridian in Idaho; and $2 million to a Mexican lender. The documents also say the resort owes an unspecified amount to the Internal Revenue Service and the State of Idaho.

The resort is now aggressively pursuing additional financing. “Despite the challenges of the current real estate and financial markets, Tamarack is very optimistic it will succeed in finding alternate financing,” Boespflug said. “We are hopeful of finding alternative financing within 60 days.”

To view a PDF of VPG Investment’s bankruptcy file, click here. For Cross Atlantic’s, click here.

The resort, which features skiing, golf, and numerous other activities as well as a wide variety of high-end real estate offerings, opened in 2004 after Afif and Boespflug took over a controversial and long-stalled ski resort project. It billed itself as the first new ski resort to be built in the United States in more than two decades. In 2006 Tamarack released a press statement touting a new financial plan allowing resort managers to borrow up to $250 million from a Credit Suisse fund.

In a prepared statement released Monday, Boespflug said some of the resort’s construction plans have been put on hold due to an “extraordinarily difficult financing environment.” But there was no mention of a bankruptcy filing.

“Tamarack finances our construction with large credit facilities, representing multi-million dollar loans, used to pay the cost of construction needed to deliver projects such as the Village Plaza,” he said in the statement. “Our finance team has been working diligently over the last several months to secure our next credit facility needed to continue our real estate development and construction projects.”

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