Tales From Bankruptcy Court
Yellowstone Club Gets a (Brief) Lease on Life
By Robert Struckman, 11-13-08
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A Montana bankruptcy judge reluctantly breathed three weeks of life into the Yellowstone Club in a Missoula courtroom Thursday when he OK’d a three-week loan to keep the club operating during the next stage of bankruptcy hearings.
“Why am I doing this?” asked U.S. Bankruptcy Court Judge Ralph B. Kirscher, who called it “troubling” and “overkill” that his order included the terms and conditions of a $4.4 million temporary bailout loan from lender Credit Suisse to the luxurious-but-broke private club.
“What happens if I don’t sign this order?” Kirscher said. “If you would have asked me at one o’clock last night, I would have said, ‘This isn’t going to get signed. I’ll let things fall where they may.’”
The judge posed his questions in the second day of emergency hearings in the Chapter 11 bankruptcy case of one of the world’s pre-eminent leisure communities for the mega-rich.
The four companies that operate collectively as the Yellowstone Club filed for bankruptcy on Monday, citing debts of about $360 million, most of it owed to a consortium of lenders led by international bank Credit Suisse. Chapter 11 allows a business to operate while it reorganizes its debt. The filing comes in the wake of an ugly divorce, allegations of large-scale financial impropriety and the collapse of the high-end real estate market as well as the credit markets that funded it.
Last week, the club’s checking account had only about $40,000, not nearly enough to cover weekly operating expenses such as payroll ($246,000), utilities ($98,000) and other necessities, according to court documents.
“If we don’t have an order today, we’ll have a financial train wreck,” answered James Patten, attorney for Edra Blixseth and the Yellowstone Club.
But without another bailout, the club may wreck anyway, the judge rejoined.
“It certainly isn’t perfect… but it’s what we have,” Patten said.
The idea is that the three-week loan will allow club managers and its creditors to work out a long-term plan to save club.
One underlying question behind the hearing was who would emerge as the owner of the club after the dust settles, and at what price.
Those vying for ownership positions included Credit Suisse, the club’s long-time lender, which is owed about $307 million, and CrossHarbor Capital Partners, a Boston-based hedge fund led by investor and club member Sam Byrne. CrossHarbor negotiated for more than a year to buy the club before the crisis hit, and apparently saw an opening in the wake of the divorce of Tim and Edra Blixseth. According to testimony Wednesday, CrossHarbor loaned some $35 million to Edra to help her buy out ex-husband and founder Tim Blixseth.
CrossHarbor had offered a loan of $18 million to keep the club open until February 13, at which point—in the peak of the ski season—it would presumably have to be sold.
“We’re really in a crunch,” Judge Kirscher said, referring to the club’s lack of cash as well as the hurried pace of the proceedings.
“Either we let this thing go, or I say, ‘No,’ and it ends up being converted by the middle of next week,” Kirscher said. “This may be just deferring the inevitable. I don’t know what else to do with it, to be honest.” (In bankruptcy court parlance, to “convert” it would mean to move form Chapter 11 protection to Chapter 7 - immediate liquidation.)
With that, Kirscher overruled the legal objections of club members and of other parties and said he would sign the order allowing the Credit Suisse loan. He also set the next hearing for Nov. 25 at the federal courthouse in Butte.
At that point, Patten and the lawyer for Credit Suisse anxiously asked Kirscher to immediately sign the order. The club had been operating without cash for a week or more.
“We need to get the money moving as soon as we can,” Patten said. A wire transfer would move the first installment of the loan, first thing Friday morning.
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Comments
My guess is the vaunted Yellowstone Club will be an average groomer hill, where the public will snicker at the houses as they ski by, shaking their heads at the hubris of those that built their shrines to their own greed.
Its almost a stupid enough idea that Bush may well want to do it as his last act as president.
Plum Creek is a gift that is going to keep on giving, folks. This last deal was Baucus vesting them with guaranteed sales to the TNC and TFPL....who will find willing buyers. That taxpayers are on the hook for close to a billion dollars when it all falls out, including Weyerhaeuser being singularly placed in a REIT/TIMO tax rate even as they maintain being a horizontally and vertically structured megacompany in the design of the Japanese Zaibatsu. You pay to play, and Baucus must have gotten some heavy duty dough to pull that one off. TNC and TFPL will make millions in commissions selling the land to government or their own private clients. Ten years from now, we will hear the wails of those who thought all that PCT land was going to be a roadless park for mountain bikes and endurance runners, but instead ended up in high end resort land. You can call that a Montana Blue Job, from two Blue Job experts, Baucus and Schweitzer. The smoke enema is free. A health benefit. Go buy a wildlife calendar from an NGO and make yourself feel better.
This Blixeth deal is just another Blixeth deal. I saw in the paper today that some are urging the State of Oregon to have the Board of Forestry incur a load of bonded debt to buy 400 sections of land Timmy raped to make his second or third fortune, the Gilchrist tract. Picking up the Blixeth pieces is government work, it now appears. "Save the land from development." Other pages of the paper tell us how large the upcoming cuts in government and education are going to be. Blue States invest in land, not education, or so it would appear.
So why don't governments do their designated job and give Timmy a day in court to deny whatever charges can be brought. They do that to mafia guys all the time. Certainly his CFO going out on a propane explosion would qualify for some sort of inquisition. Governments are really interested in books, accounting, and financial reports, or at least they are from us simple workaday mortals.
Or, the world is going to have to deal with Timmy somewhere else, in another place, for all the same reasons. And somewhere in the background will be Plum Creek because their Timmy deals work out well for them. Pie-in-the-Sky Lumber company. Have we got a deal for you!!!!
I have been reading comments this week and don't understand how a $35,000,000 loan secured by a home that converts to equity in a probably bankrupt company is senior to a loan that has been identified in the $307 to $360 million range. Please explain.
Thanks.
After ten months of being in limbo, our owner (Pivotal Group) just put a reorg plan together that is basically a child's Christmas Wish List: they want to sell Promontory to another party, protect homeowners deposits, and have the debtholders (CS and their investors) take back some form of equity instead of their debt. Oh yeah, and World Peace. Basically, they cannot get financing at a price tha justifies the diminished return expectations that they have for the Club, so they're bailing. I'd say that there is some chance that no one bids for the Club and Pivotal gets to keep it. CS has been pretty quiet throughout this process so we'll see if they show up when the property is sold.
What I will note is that our owner had the financial wherewithal to provide cash to the Club throughout 2008 so that the level of services were kept (more or less) at a pretty high level. To date, he has provided $25mm which becomes senior debt to the CS debtholders. I'm sure our owner was also severely pressured to do so by all of the people/friends/associates that he brought into the club over the years. I don't know the details of the Blixseth situation, but it sounds like Tim pulled a fast one by giving the Missus the White Elephant (I'll bet Tim & his partners kept all of the cash from the debt sale).
CS is certainly getting some heat from their clients that bought this deal, but in many cases these debt deals got chopped up into different levels of securitizations (CDOs, SIVs, etc.) that reduce the ability of any one party to leverage their stake. Nonetheless, a debtholder's committee will get formed, and CS and some hedge funds ar likely to lead the charge. The last thing you want, as members, if for an unassociated entity to show up & buy the place. You 'll run the risk of having membership deposits wiped up (don't forget that you're an unsecured creditor now). Until that happens, its a really bad idea to stop paying dues. If the Club goes dark, then your property value is crushed even more. You might be pissed off but you'll do better by controlling the unsecured creditors committee and making sure that you get good legal representation. Pay up a little now to save a lot later.
At this point, Promontory is probably better off if Pivotal picks us up on the cheap. What's that saying: sometimes the devil you know is better than the one you don't? TAgain, with pressure from the members, they have committed to preserving membership deposits which, besides the member's homes, is the major asset we have there. CS will talk like they want to preserve homeowners value, but in the end they care more about their clients (insurance companies, hedge funds, etc that bought this pig) than you, and their clients want as much of their money back as possible, so goodbye deposits.
Good luck!
Contact me at if you wish to protect your investment in TYC.
I hope that management of this mess hangs!!!!!!!!!!!!!!!!!!!!!!!!!!
honest sub
I'm also one of the small business owners who has gotten screwed by the Timmy, Edra and the upper management of the Yellowstone Club. They nailed me once I put them on COD, by giving me a Credit Card number that had been shut off. What's even better is employees still keep on trying to buy product, but once they find out COD they pretty much hang up without saying goodbye. Your not any better than these "Elite Crooks" that have raped our land and money. You knew what was going on!
Good luck finding jobs with a reference from the Yellowstone Club, the World's only private Golf and Ski community.
There is not a private equity firm out there with deep enough pockets to fix your problem. They are all held accountable to shareholders. Sam Byrne will simply leverage what he can to get the club on the cheap, and then let it sit until the market turns years down the road. He is simply a band-aid on a broken arm.
YOU people need someone with so much money that time and expense are not an issue. You need a Gates, or one of the oil or land barrons from around the world to fix this. You need someone who can look further out than the next few years, and has the money to operate the club as if there is no recession. If this club or any other like it had unlimited financial backing, the wealthy would flock there as a safe haven. The whining locals still would not be able to ski that hill, but they would have jobs, and an economy for selling their crap.
Whining yes that is me whining about not getting paid yup that is it.
You Obviously have no ski in the game and are nothing short of another internet chat room TROLL. Enjoy your self I bet your parents are proud
Us uneducated cowboys and ski bums never needed the oligarchs (fools with money may they be) to buy our wares. Montanans survived before the introduction of the dysfunctional fiefdom, and will survive well after.
People warned that Blixeth was a con man years ago, and few, if any, in Montana took heed. All an investigative reporter had to do was go to Roseburg or Portland, Oregon, ask around. Timmy's trail of Tears was established long ago. He just has not been brought to justice, yet. Bankruptcy judges are Federal appointments for life. Evidently Timmy finds ones that are kind to him, and don't look hard and far enough to find his hidden assets, stuffed mattresses, hidey holes for cash. He has them. You have to know that.
Sometime, somewhere, some false promise or fraudulent offer crossed state lines, and at that time, a US Attorney can ask the questions, ferret out the truth. In our justice compromised U.S. Attorney General's office, where Clinton asked for and got the resignation of all US Attorneys so that he might appoint his own for political purposes, and Bush only fired less than a dozen, a new administration and a new Attorney General might take an interest in Timmy. But, if Timmy has given liberally, to the left, he is home free. He will have covered his bases. And don't expect help from Montana, as they are now marching to the same drummer, taking orders from like minded thinkers. If Obama asks for and receives US Attorney resignations, then justice is for sale once again. That might lend some hope to the powerfully wealthy who have invested in Timmy's scam. They can buy his prosecution, and maybe gain some modicum of restitution if they have been damaged.
We are doing our best to report this story and enable people to have their say. We request, once again, that if you have real information about the motives and interests of the various players that you get in touch with us directly. Anonymous accusations and innuendo are not helpful for anyone.
You may think that we are local whiners, but that doesn't change the fact that the Club did not hold up their end of the bargain. They have not paid there contractors, vendors, and employees in months. Don't you think people deserve to be paid for the work they have already done? For services they have provided? Many of us are not just a bunch of rich people hustling antler chandaleirs and as you said "Chic Garbage". Many of us are providing services and products such as; food, gas, water, concrete,cleaning services, etc...Do you think it is right that someone who scrubs the floors for 3 months straight shouldn't get paid? I think the companies who have served YC over the years were just looking for honest work. Obviously, counting on millionares and billionares to pay their bills was a big mistake on my part. I also want to add that I offered YC the same pricing that I offer my other clients. In many cases they received discounts for large orders. My conscience is clean...I know I provide hard work at a reasonable price. All I ask, Thomas Crowne, is that you think about it a little harder...
PS. I know that most of those antler chandaliers you speak of were provided by companies out of California and Mexico! Think about it!
We're more than happy to have your insights on the situation. Put your name behind it if you want anyone to care, or better yet, call me or Bob Struckman. Otherwise you're just another anonymous mud-thrower, with all the credibility that goes with that. If I didn't have to spend time policing comment threads for this type of stuff, I'd have more time to report on the story.
"In our justice compromised U.S. Attorney General's office, where Clinton asked for and got the resignation of all US Attorneys so that he might appoint his own for political purposes, and Bush only fired less than a dozen, a new administration and a new Attorney General might take an interest in Timmy. But, if Timmy has given liberally, to the left, he is home free. He will have covered his bases. And don't expect help from Montana, as they are now marching to the same drummer, taking orders from like minded thinkers. If Obama asks for and receives US Attorney resignations, then justice is for sale once again. That might lend some hope to the powerfully wealthy who have invested in Timmy's scam. They can buy his prosecution, and maybe gain some modicum of restitution if they have been damaged."
First of all, both Clinton and Bush fired nearly all US Attorneys when they took office. As did Reagan, and nearly all other presidents. You might not agree with it, but both parties do it. It is less common to fire a bunch of US Attorneys with good performance reviews in the middle of the term, and that is what the scandal was all about.
Oh, and by the way, here are Tim Blixseth's campaign contributions: http://www.newsmeat.com/billionaire_political_donations/Tim_Blixseth.php
Total: 84% Republican, 10% Democrat
Most recently: Gave a bunch of money to Rudy Giuliani
Doesn't look like an Obama friend to me. But I am sure you'll find a way to twist the facts and make him a closet liberal...
For all the YC folks: Is that golf course still dependent on someone in Big Sky flushing a toilet for it to have irrigation water?
Thanks for the info. So this covers unsecured creditors that are owed $1,000.00 or less? Just to clarify?
Do you know what happens with businesses that are owed more? Say 10,000-$20,000 range. Just looking for your opinion, if you have any inside info. Thanks!
I respect your position and was the only reason to report to you the loan agreement now in default with regards to Porcupine Creek. Please research the Rancho Mirage area of filings and you will see the notice given on the 35 million note from Cross Harbor to Edra Blixseth. The note went into default October 2, 2008. I am more than happy to post on this blog page if you can not find the official recording of that foreclosure? Is this legal to do? It plays a vital role in the change of control the Yellowstone Club will undergo in the coming weeks. Why is this important? It goes to show the length some investment groups will do to take over a club for personal reasons. Why is this important? Because Tim Blixseth is still very much part of Sunrise Ridge, the condo development owned by Cross Harbor. This can be verified in the Montana records of property owners. Now why is this important? Because Edra was placed into this position which appears to be (Maybe wrong here but doubt it) a victim of Tim Blixseth and Cross Harbor strategy to allow her to win the club and force her hand financially. Make a few calls to American Bank in the area, speak to the President of the Bank, he has a lot of questions which should be posed to him, such as 1 - how much money did he loan Tim Blixseth over the last 6 months? What loans are in default with his bank today? Did he finance part of the Overlook lots? What is American Banks' relationship to Edra Blixseth and Tim Blixseth via Cross Harbor?
Finally, lets pose a logical question. What is the club worth today given the chapter 11 filing? The press and you state the debt is somewhere between 343 -399m correct? What is the equity remaining given the current financial crisis? Lets assume no more than what Cross Harbor offer in January 2008 which was 450m. Clearly this value was 9 months ago correct? So lets factor in some more bad press and lack of lot sales. Can we assume the value is then around 435m? Now that would mean the equity of the club is 35m. Lets see, that appears to be the amount under default against Porcupine Creek correct? Was this a quick handed tactic? Now who really cares who owns the club unless your a member or employee or contractor correct? Big Question here: Does Cross Harbor plan on paying off Greg Lemond, the back salaries, the payment to Mike Snow, refund the world club members, pay off all the suppliers, finish the club as promised to the current members, promise the employees job security, inject required money into the club and if so where is this money coming from? Food for thought but its just that. Its like a puzzle but if you add up the parts its a story correct? Now, ask yourself this, Did Tim Blixseth and Cross Harbor plan it this way given that Edra Blixseth was opposing them cooperating in January 2008? who knows but again these facts are there for you to research if you want to do investigative reporting.