Blixseth, Credit Suisse Await Verdict
Yellowstone Club Bankruptcy Showdown Enters the Home Stretch
By Jonathan Weber , 5-10-09
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If all goes according to plan, the Yellowstone Club bankruptcy saga will be all but resolved a week from Monday, with a sale of the club approved, many if not all of the creditors set to receive a good chunk of their money, and the process of rebuilding the brand and implementing a long-term plan for the property ready to begin.
But of course a lot has yet to happen between now and then. Here’s a round-up of the latest developments.
- Lawyers were back in court in Missoula again on Friday for a “valuation” hearing, aimed at determining how much the collateral on the infamous $375 million Credit Suisse loan to the club is actually worth today. The collateral includes the unsold real estate and most of the infrastructure - but not, notably, the base lodge - and Credit Suisse pegged the value at $232 million, while others said it was much less. Among the interesting tidbits to emerge Friday was that no less than nine houses at the club are in foreclosure, a fact that is sure to depress sale prices for some time. The large number of houses and lots available in the secondary market (i.e. from people or companies that previously bought them from the club) means it will likely be some time before there’s much new home construction or sales of club property.
- The much-anticipated auction of the club is set for Wednesday in Billings, but it’s not clear at this point whether it will be very exciting. Initial bids were due last Wednesday, and only two were received - the “stalking horse” bid from CrossHarbor Capital, and a so-called credit bid from Credit Suisse and several of its noteholders. It appears that late bids will be allowed, so it’s possible other parties will emerge before Wednesday, and the Credit Suisse bid could yet evolve to include other partners. CrossHarbor, meanwhile, is rallying support among club members to “co-invest” in its proposed deal to buy the club, with some success. Strong member support would be a huge asset for any bidder
- Sometime late Monday or Tuesday, U.S. Bankruptcy Judge Ralph B. Kirscher will issue his ruling in the lawsuit pitting the club and the unsecured creditors committee against Tim Blixseth and Credit Suisse. His decision will be critical in determining the course of the auction and the bankruptcy as a whole, because if Credit Suisse is found culpable the loan could be voided (which would not only eliminate the bank’s claim for the remaining $310 million it’s noteholders are owed but could also force it to pay back money). In that scenario, the “credit bid,” in which a creditor essentially uses an offset against what he’s owed as part of the purchase price, would not be allowed, and Credit Suisse would most likely be out of the game.
- A verdict against Blixseth would have less immediate impact on the bankruptcy proceeding, and would likely set the stage for extensive further litigation. He and his attorneys have already indicated their intention to file suit against a number of parties who are directly or indirectly involved in the case. Blixseth also faces a lawsuit from the minority shareholders in the club, and is likely to face further legal action, in particular relating to the transfer of the Tamarindo resort property from the club to him.
- The club late last week filed suit against Greg LeMond and his associates over the $38 million settlement of the lawsuit that he brought in 2006 against Blixseth and the club. Lemond is still owed $13.5 million of that settlement, and he’s also brought a separate action demanding $15 million for marketing services under an agreement he had with Blixseth and the club. He’s filed a claim for those payments in bankruptcy court, but the club now says the settlement payments were themselves a “fraudulent transfer” since they were for equity in the club that is now worthless. The lawsuit was not really a surprise in the circumstances, though some lawyers involved noted the irony in the fact that the case against Blixseth and Credit Suisse that was tried last week relied heavily on evidence developed in the LeMond lawsuit. An eventual settlement of this action is likely.
- On Monday, May 18 is the “plan confirmation” hearing, at which point the court will in theory give final approval to a sale of the club and the associated plans for paying off creditors. Plan approval requires voting approval from the creditors (it’s complicated, with different classes of creditors having different rights), and ideally by the time plan confirmation arrives everyone is in agreement and, as one lawyer in the case notes wryly, “holding hands and singing Kum Ba Yah.” In this case, that will be quite a sight to see.
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Comments
Phoney club with phoney members formerly run by the king of charlatans with phoney money. This was unforeseeable. By some.
One of the great ironies is that Alan Greenspan himself made comments critical of the broad scale overvaluation of the financial markets several years ago, then proceeded to foster monetary policy that aided and abetted much of what came to pass with cheap money. Of course, now he gets paid a lot of money to comment on federal monetary policy on CNN, and seemed to be washing his hands of any responsibility toward the mess we are in.
Anyway, I read Beckley's comments and didn't think what he said was all that off the mark.
Lot 176 and 178 are co-owed by Edra Blixseth and Mathew Crocker but they owe 13m to Western Capital and American Bank. Seems to me if I were the creditors I would want access to those houses to SEIZE the furniture which belongs to Monarch Design, another EB company! A Billionaire's GARAGE SALE perhaps?
The other houses, we lets see, Greg LeMond et all owns the Mirror Pond House which has not sold for 2 years. Hard to imagine this spec house is not paying its bills given the enormous payout to Greg LeMond who recently got the shaft by EB/SB/CH?
Other big owners of houses but clearly wealthy people are YR,BS,WP,JD and of course TB. None of these are even close to having problems. SB/CH have 4 houses? Maybe SB is going to sue his lenders for giving him too much money on false valuations and then claim its all EB/TB fault? His testimony said it all in court, all hype but no logic and when pressed for real answers he went silent. The best part of SB on the stand when he actually admitted his company never ran a title search against YC before plowing in over 150m into 4 houses and 56 condo's. Can you imagine investing into a REAL ESTATE FUND and having your money managed with such a lack or professional due-diligence. Amazing how CH treats other investors money and then has the never to charge them Investment fees on top of it! Where do we find such ignorant investors as with that type of due-diligence anyone should be able to raise money or is that how the economy got into this mess? A bunch of smiling Wallstreeters who hide behind the corporate veil and smile like they know it all?
In regards to other properties, I would assume there is a CONDO in there somewhere, of course there is Warren Miller 304, also owned by Edra Blixseth, who as the public record shows, cut a deal with Bruce E (Founder of American Bank). Great story on that one! Edra was in default to American Bank for 7m, Bruce owed Yellowstone club 3m for the condo and Edra had a house in Casa Captiva Mexico. So what do you do when you are the owner of the bank? Very simply, you inflat the value of your own condo (Basically falsify a valuation report) to show Warren Miller condo worth 13m, then you do a sneaky trade with Edra to clear out your problems. Here is how it worked, Bruce trades Edra Warren Miller 304 Condo at a value of 13m for Casa Captiva at the same value. Amazing. Then American Bank who has a loan to Edra for 7m which is in default, refinances this loan for 9.5m based on the value of the condo being 13m. Appears to be a good Loan to value 9.5m on 13m of value (73%), the 2.5m is paid to the club that Bruce owes which was also past due and shazam, Bruce E walks away with a new house in Mexico debt free. Only problem is EB lied to him and said it had no liens. Opps, Bruce E was Edrasized! Her very own lawfirm from California had a lien on it for 5m. Now, can anyone tell me who is the guilty party in that one? Seems both did something wrong did they not but who really got screwed? I leave that to decide as its a court case going on as well and Bruce E and EB have a lot of explaining to do.
Your post reads like "journalism" on FOX. Does everyone in the courtroom have to put clothespins on their noses (smell of skunk).
Time to quit playing games with people's lives and lands, start over, join gamblers anonymous..