Bankruptcy Payout

Yellowstone Club: 800 Checks in the Mail

By Jonathan Weber , 8-20-09

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

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

Those who are owed larger amounts of money will have to wait a little longer. Under the bankruptcy reorganization plan, the club was sold to CrossHarbor Capital Partners, and a special trade creditor fund was established to pay off $15 million owed to vendors and contractors. The club has sought court approval to begin payments from that fund, but disputes have emerged over some of those claims, and a hearing on that matter is scheduled for Sept. 15.

It’s unusual for unsecured creditors to get paid in full in the wake of a bankruptcy. But in the Yellowstone Club case, the court ruled that investment bank Credit Suisse had acted inappropriately in extending a $375 million loan to the club in 2005, and this the claims of lenders - which would normally be the first thing to be paid - were put at the back of the line. CrossHarbor, the creditors committee and club members also made that case that paying vendors was critical to community goodwill and the club’s long-term success. U.S. Bankruptcy Judge Ralph B. Kirscher agreed, and thus trade creditors will be paid in full - though Credit Suisse still has an incentive to challenge any claim that it can in the hope that there will be some money left for its lender group.

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