Yellowstone Club In Desperate Straits, Court Papers Say
By Robert Struckman , 11-11-08
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| The road has been a rocky one for the Yellowstone Club. File photo by David Nolt. | |
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The Yellowstone Club near Bozeman teeters on the brink of closure and lacks the cash to make payroll for 521 employees for the next three weeks, if a Montana bankruptcy judge doesn’t allow the company to take on another $4.5 million in debt and spend its cash collateral, according to a plea filed in the resort’s bankruptcy case.
The uber-exclusive, 13,600-acre Yellowstone Club filed for Chapter 11 bankruptcy protection late Monday, citing a total of $344 million in debt, mostly to international bank Credit Suisse, and about $1.1 billion in assets, court filings say.
A special request filed alongside the initial bankruptcy papers asked U.S. Bankruptcy Judge Ralph B. Kirscher to OK an immediate hearing in the case to decide whether the club could use its cash collateral and to take out the loan.
The filing says the club’s operations “have an immediate need to use cash collateral, without which they would be unable to operate their businesses at this critical time…. Moreover… cash collateral alone is insufficient to afford the debtors the ability to manage their businesses and generate revenues.”
Those ongoing obligations include payroll and contractors among others, the filing says.
In an emailed letter to club members sent Monday, Edra Blixseth wrote that she had been working “feverishly to remedy Yellowstone Club’s capital and liquidity situation” with “a roughly $100 million preferred equity infusion” into the club. The financing plans fell through, though, as did efforts to sell Yellowstone Club World assets in France and Scotland.
Blixseth wrote that the club’s financial troubles had damaged staff morale and undercut the willingness of vendors, such as food service companies, to supply the club. She told members the club plans to continue to work on a recapitalization plan with Credit Suisse.
Chapter 11 bankruptcy allows a business to remain open while it reorganizes its debt.
In an order made Tuesday morning, Judge Kirscher said he would hear the case on Wednesday. Specifically, Blixseth has asked that Kirscher allow the club to use as collateral for the new loan the club’s assets, which have already been obligated to lender Credit Suisse, among others, and are already encumbered by liens from construction companies who have not been paid by the club.
Over the past year and more, the Yellowstone Club, the world’s only private skiing and golf community, has been in and out of the news, thanks to the public divorce of owners Tim and Edra Blixseth as well as legal battles between owners and Tim Blixseth.
Also, earlier this year the club missed loan payments to creditor Credit Suisse and has been on the verge of seeking bankruptcy protection. This summer, Edra won control of the club and vowed to get its overdue construction back on track and to keep its business out of the public eye.
Edra Blixseth and the Yellowstone Club tried to take a step in that direction in September by entering a long-term contract with Discovery Land Co. of Scottsdale, Arizona. The company, which operates 15 other private communities around the world, took over the management of the club and planned to expand the residential community, infrastructure and amenities.
“In the short term, we need cash to take care of members and infrastructure needs and supplies,” said club spokesman Bill Keegan said. “This bankruptcy will allow the club to get out from under the weight of the debt to allow them to open for the season.”
The period from Thanksgiving to New Year’s is the club’s peak season, accounting for a significant share of its revenues, the filings say.
In a press release Monday, club managers said they plan to open as usual for the winter ski season in early December and conduct normal operations.
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Comments
Us Oregonians can only say: "Told ya so."
This has to be shown. The AP just released a statement from Greg Lemonds' lawyer and Tim Blixseth!!!! Read below and lets hope New WEST continues to report the facts to all of us.
From the AP today as an UPDATE to their release last night:
Associated Press
Resort for the rich owes $343M, asks court approval for $4.5M loan to stay open
By MATTHEW BROWN
11 November 2008
BILLINGS, Mont. (AP) - Court documents show the exclusive Yellowstone Club mountain resort in Montana owes an estimated $343 million to creditors such as banks and local contractors.
The residential club for the ultra-rich on Monday filed for Chapter 11 bankruptcy protection. The court filing says tight credit markets had made it difficult to raise money both to pay off the club's debts and make needed repairs to the resort.
Attorneys for the club are scheduled to appear in federal court in Missoula on Wednesday, to ask for Judge Ralph Kirscher's approval of a $4.5 million loan so the resort can open for the winter season.
Founded in 1999, the invitation-only club in the Gallatin Mountains counts Bill Gates and Dan Quayle among its 340 members. It had been planning a sweeping expansion when the credit crisis hit Wall Street. That choked off the club's flow of capital, demonstrating that even the elite are not escaping the nation's economic woes.
Critics accuse the club's founders, Tim and Edra Blixseth, of going on a spending spree even as the luxury real estate market stagnated, setting the stage for the bankruptcy filing. Listings of the Blixseths' assets include at least four foreign estates, two luxury jets and fleets of boats and vehicles.
"What this is about is an orgy of spending. An orgy of borrowing," said Jim Goetz, an attorney who represented cycling star Greg LeMond and others in a lawsuit against the club recently settled for $39.5 million.
Goetz said the final $13 million installment in that settlement -- due Saturday -- is now in doubt.
"They lived pretty well -- Gulf Stream (jets), Bentleys, Aston Martins. In hindsight, as well as in our foresight, it was ill-advised," Goetz said.
Yellowstone Club spokesman Bill Keegan said claims that the Blixseths were diverting club assets for personal use "have no basis in fact." The couple has since divorced, with Edra now controlling the club.
The club still retains assets worth more than its debts. Keegan said the bankruptcy protection was sought so the club can reorganize and settle up with its creditors.
Court filings list the value of the club's property at $778 million. That does not include unsold memberships valued at $336 million. If Chapter 11 protections are granted, the club could continue operating while it works out a plan to pay off its debts.
Meanwhile, the financial turmoil has put on hold expansion plans for the resort that were announced in September.
Through a development partnership with the Discovery Land Company of Arizona, the club had planned to build 450 additional houses and condos, an ice rink, a baseball field, a luxury spa and more ski runs.
"Here they were off and running and planning this expansion. Then, as they looked to secure long term financing, the meltdown occurred and everything froze up," Keegan said.
The bulk of the club's outstanding debt -- $307 million -- stems from a recently defaulted 2005 loan for $375 million.
When that loan was arranged through Credit Suisse, Tim Blixseth persuaded the club to pass $209 million directly to him and his corporate alter-ego, Blixseth Group Inc., according to court documents in the LeMond case.
Blixseth then attempted to take the club concept global with Yellowstone Club World, an international replica of the Montana enterprise but with a steep $1.5 million buy-in fee. Over the next two years he bought a chateau in France, a golf resort in Scotland, a villa in Mexico and an estate in the Caribbean.
Edra Blixseth has been trying to sell at least some of those properties since taking control of the club in August.
In an e-mail message to The Associated Press, Tim Blixseth on Tuesday denied allegations that the estate buys left the club financially exposed. He said the properties were bought when the real estate market remained "hot" and that some of the properties had since increased in value.
Tim Blixseth also said he had "not been in the loop" regarding the club's recent financial problems. But he said Edra's expansion plans seemed feasible at the time they were announced.
"She had no way of ever knowing what was around the bend in the world of finance," he said. He said the expansion "likely would have come to fruition had the entire world not had a financial heart attack."
However, Montana Gov. Brian Schweitzer said Tuesday that questions remain over the handling of the club's finances. With other creditors lining up to get paid as part of the bankruptcy proceedings, the Democratic governor said local contractors and subcontractors were at risk of losing money owed for work already performed.
He said the state would have an observer at Wednesday's court hearing in Missoula.
"Credit Suisse came in with $375 million, and now there's whole lot of contractors and subcontractors that have not been paid," Schweitzer said. "We'll be openly asking the question, 'Where did the money go?'"
The guy pumping my gas today said it was cheering for him to pick up the paper and read that AIG was getting another bunch of billions to shore up their insurance business. Here he is, pumping gas for the minimum wage, going in the hole monthly, and the billionaires are getting the money taken out of his taxes ostensibly to pay social security some day in the future. He knows he is saving the billionaires, him and millions like him, and that is just not making his heart go pitter-patter, not making him feel warm and fuzzy all over. And their not being able to avail themselves to their golden parachutes was not making him feel a whole lot better. Not at his salary for what he is doing, compared to what they get paid for really, really, mucking up this country and our treasury. He is barely holding on to a job, and they still are getting paid millions. No justice. There never has been any for Tim to this point, and most likely never will be any. Teflon Timmy. Guilt, shame, honesty, morality, responsibility, all he is able to shed like water off a duck's back.
If Lemond got $26 million of the $39 million owed, he should consider himself a hero, and maybe luckier than he was when he survived his Cheney moment. Most creditors are going to get what the little boy who wanted the pony for Christmas found in his stocking----a sack of horseshit.
But last time I checked the lights were on. The lifts all work great, the lift maintenance department was hard at work all summer, if you happened to look at the liftlines this summer as you drove by in your range rover you would have seen them out on line. Not sure if you noticed but the snowmaking crew been cranking the snow guns when it's been cold enough. Hard to do that without power... Our goal is to make this the best season ever. But we are sick of siphoning gas out of broken down work trucks so we make the ones that do run last a few more days. Give us the tools, supplies and spare parts we need and we can do great things. We don't care about your lear jets or crappy yachts, we worry about feeding our families and being able to afford health care. We like our jobs and try to do them well, but its hard not to get a little disgruntled listening to you fuckers bitch about whether the damn spa has been finished or complain because you don't have a proper clubhouse. Either you came for the skiing or you came for the golf or you came to make money. Why don't you all get together and make the place work again instead of suing eachother and trying to get richer than you already are. We could really give a shit on whether Greg Lemond gets his $13 million dollars, we just want our missing paycheck and possibly a little gas for our work trucks. Pray for snow!
Nice to have a straight forward answer. I am glad to see that there are lights on at the club, glad to see its going to be the best season ever and glad to see everyone is paid and the employees are happy. You work hard and so do the members. Let’s put it this way, you save for a family and so do the members. How would you feel if you spent 7.5m USD on a bunch of lies only to find out you have been screwed? Put it this way, you went inside agave the gas station 50 buck to fill your truck up but went out to the pump and no gas came out. It’s all relative so it’s not a matter of could care less about Greg Lemond getting screwed, you see we the members pay and we thought it was going to the staff. Say all you want about rich FuXXers you want but many just want what they paid for and to insure the club is private. You start off by saying all is fine but end with the ''Missing Pay-Check"‘Glad to see the lifts are running as you say but for how long? You do realize what a Chapter 11 is do you not? How long is 4.45m going to last up there? Let me tell you in simple terms, 4.45m gets you to December 20th unless people put money into this club. Yes the members could invest, but we already did. Maybe the members should take the same attitude as you and say ''Screw it'' and close mountain all together by not paying the annual fees. Wouldn’t that be interesting? Then we could all look at this great ''Private Powder'' with no skiing and no need for employees all together. After all, every house has its own facilities and no one eats at Warren Miller lodge lately unless you missed this over the last 5 months. 5 cover a day on a good day
Bear Bait: Great response and Tim has already tried the bail out route, it was calling all the members again to bail him out, however Wayne Primm was the only one to come to his aid.
I've worked with the Club since the begining and have developed many wonderful relationships with many of the employees. My heart goes out to you all! You are all simply trying to make a living while these "Elite Mega Wealthy Crooks" are all trying to screw each other and the good people of Bozeman.
I've been defending the Club and it's members for years because I felt their families needed the extra security that the Club provided. Well, I guess we are the ones that needed the extra security! You lied to us and robbed us of our hard earned money. I hope you are all embarassed to be part of the "YELLOWSTONE CLUB the worlds only Private Golf and Ski Community". Now..... members and owners get your act together and make things right for the people of Montana. You have the money, now use it.