Bankruptcy Payout

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.

Bankers on Trial, Again

Like the Yellowstone Club and a number of other major resort projects around the country, Lake Las Vegas in Nevada took a giant loan from a Credit Suisse-led lender group, allowed the owners to pocket the bulk of the proceeds, and then abruptly fell into bankruptcy when the real estate meltdown hit. Now, following in the footsteps of the Yellowstone Club creditors successful lawsuit against Credit Suisse, the creditors committee in the Lake Las Vegas bankruptcy has filed a suit against the banking giant, seeking to have some $545 million in loan proceeds invalidated as a "fraudulent transfer" and returned to the company to satisfy creditors.

The owners of Lake Las Vegas, primarily developer Ron Boeddeker and Texas investors Sid and Lee Bass, took some $685 million in loans from Credit Suisse in 2004 and 2005, according to the complaint, and pocketed $470 million in cash as a return on equity, with Credit Suisse earning about $13 million in fees. The development, a 3,500 acre Mediterranean-themed community with an artificial lake and three golf courses about 20 miles outside of Las Vegas, filed for bankruptcy protection in July of 2008. [more]

Resort Real Estate

The sale of the Yellowstone Club to Boston-based CrossHarbor Capital Partners was formally completed Friday, ending the main chapter of an extraordinarily tumultuous bankruptcy proceeding and paving the way for the revitalization of the luxurious private ski resort.

CrossHarbor, led by real estate investor Sam Byrne, paid $115 million for the 13,600 acre club near Big Sky, Montana, and has committed additional money to fund operations and assure payment of trade creditors. CrossHarbor will operate the club in partnership with Discovery Land Co., and plans to invest in additional ski terrain and re-orient future real estate development away from the steep hillsides and toward the base area.

The high-end resort real estate market is moribund, and it's not clear how quickly the sale of multi-million-dollar lots and condos and $300,000 memberships might resume. But the sale assures that the club will remain open and employees will keep their jobs, and the many tradesmen in Bozeman and Big Sky will receive the money that they are owed and have at least the hope of future work at the club.

“I am very happy that the Yellowstone Club has today successfully emerged from bankruptcy as a well capitalized enterprise that will have a bright future for its members, employees and the community," Byrne said. "This reorganization is not only a great result for the club, but also for the local vendors and trades people in the greater Big Sky community who will, after a long wait, be paid the monies due to them.” [more]

Bankruptcy Court, or Divorce Court?

The scene in U.S. Bankruptcy Court in Butte on Tuesday, where a hearing was held on former Yellowstone Club owner Edra Blixseth's last-ditch effort to keep control of her disastrous financial situation, was more poignant than dramatic. Edra, looking downtrodden, spent most of the day in the witness chair, trying to explain how and why she had messed up her bankruptcy case by failing to maintain insurance on her assets and filing important court documents late and incomplete.

Meanwhile, in the back corner of the Beaux Arts courtroom - which was packed during the Yellowstone Club bankruptcy proceedings but on this day was mostly empty - sat her ex-husband Tim, accompanied by his son Beau and his new wife Jessica, ready to drive more nails into Edra's coffin.

In the event, Tim Blixseth's presence, and the colorful but harsh 26-page affidavit he filed last week outlining his ex's alleged bad behavior, were academic, at least for this proceeding. The court had already converted Edra's Chapter 11 bankruptcy filing, in which she would get the chance to reorganize her own affairs, into a Chapter 7, a forced liquidation overseen by a U.S. Trustee. Tuesday's hearing (which I was able to attend only briefly) was her chance to argue that the decision should be reversed. But it seemed like a long shot, and indeed U.S. Bankruptcy Court Judge Ralph B. Kirscher denied the motion, setting the stage for a fire-sale of the Porcupine Creek estate and Edra's numerous other properties at the Yellowstone Club and elsewhere.

Tim Blixseth's court filing, though, was about more than his ex-wife's bankruptcy. The Yellowstone Club founder argues that the whole financial debacle that enveloped the club last year, and resulted in the club's bankruptcy filing and the eventual sale of the property to CrossHarbor Capital Partners, was Edra's fault. He's now hired a public relations firm to help him make the case - which, as we'll see in a minute, remains a very high-stakes affair. [more]

Tim vs. Edra

The Yellowstone Club bankruptcy may be all but over, but lest the lawyers - or the journalists for that matter - worry that they'll be out of work, we now have what might be called Yellowstone Club 2: The Edra Blixseth Bankruptcy.

Like the original Yellowstone Club case, this is anything but a normal bankruptcy proceeding, with Edra Blixseth initially filing a Chapter 11 bankruptcy that showed personal debts of more than $500 million. Earlier this month, Judge Ralph B. Kircher - the same federal bankruptcy judge who heard the Yellowstone Club case - converted her Chapter 11 filing to a Chapter 7 liquidation - a decision Blixseth is now trying to get reversed.

In a court filing late last week, Edra Blixseth outlined how she hoped to reorganize her affairs and get people paid, namely by developing (and then selling) her Porcupine Creek estate in Palm Springs as a residential golf club, reviving her highly controversial software company, Blxware, and pursuing legal claims against her ex-husband Tim and others. (A PDF of her affidavit is here).

On Thursday, Tim Blixseth fired back in spectacular fashion, filing a court declaration that lays out in great detail his argument that his ex-wife's wild spending and "dishonest tactics" were actually the cause of all the problems. (PDF here) The affidavit offers lurid details of Edra's alleged excesses - including a supposed "divorce celebration" party which cost $90,000 and included "invitations in the shape of a parking meter which, when opened, revealed my face and read 'your time has expired'." [more]

Yellowstone Club Saga Continues

In a mixed decision that answers some questions but leaves many others open, U.S. Bankruptcy Court Judge Ralph B. Kirscher on Thursday threw out a key portion of Tim Blixseth's defense in the Yellowstone Club bankruptcy court lawsuit, but at the same time re-opened the trial and set an August date for the proceedings to continue.

The lawsuit by the club and the committee representing unsecured accused Blixseth and investment bank Credit Suisse of engaging in a "fraudulent transfer" and breach of fiduciary duty in connection with a $375 million loan to the club in 2005. Kirscher last month issued a partial ruling against Credit Suisse, putting the claims of its lender group at the back of the line due to what he characterized as the "predatory" and irresponsible nature of the loan. That ruling prompted a settlement of the main bankruptcy case, with CrossHarbor Capital Partners buying the club for $115 million in a complex deal that assured that all unsecured trade creditors would get paid.

The settlement called for the court to vacate its ruling against Credit Suisse. But the claims again Tim Blixseth, who could ultimately be forced to repay more than $200 million, remain unresolved.
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Emerging from Bankruptcy

Brushing aside a spate of last-minute objections, U.S. Bankruptcy Court Judge Ralph B. Kirscher on Monday approved the reorganization plan for the bankrupt Yellowstone Club, clearing the way for the property to be sold to Boston-based CrossHarbor Capital Partners.

Confirmation of the reorganization plan and the accompanying sale of the club were all but assured after a negotiated settlement was reached two weeks ago with investment bank Credit Suisse, which brokered a $375 million loan to the club in 2005 and now represents the entities that hold the remaining $310 million of debt. But former club owner Tim Blixseth and manager Bob Sumpter continued to object to the plan, and a late objection to the settlement agreement emerged from Highland Capital, which was the manager of the loan funds that included the Yellowstone Club loans.

Highland's objections had to to with a matter that is often important in these kinds of agreements - the "releases" in which everyone agrees not to sue one another. Highland was apparently seeking to retain the right to take legal action against Credit Suisse, whose behavior in making the loan was harshly criticized by Judge Kirscher in a ruling which put the Credit Suisse lender groups claims at the back of the line. But Kirscher denied all the objections after a relatively brief hearing Monday.

CrossHarbor, a real estate investment firm led by Sam Byrne, will now acquire the club for $115 million in cash and debt, and commit to investing up to $75 million going forward. All unsecured trade creditors should be paid in full under the plan. The Credit Suisse lender group will get a new $80 million note, and may be able to recover additional funds from the sale of the Chateau de Farcheville in France and from legal claims against Tim Blixseth. [more]

Idaho Property still on the ropes

A handful of possible buyers have emerged for the shuttered Tamarack Resort near McCall, Idaho, and if all goes well a new owner who would re-open the resort could be in place within the next 3-4 months.

The situation remains tenuous, and a court hearing Thursday focused on if and how the resort could come up with additional temporary funding to maintain the property while a deal is negotiated. The latest interim funding provided by the Credit Suisse-led lender group - which loaned Tamarack $250 million in 2006 and is now owed well over $300 million with penalties and interest - will expire at the end of the month. Final resolution of that issue was postponed until tomorrow.

But for the first time in the many months (the resort filed for bankruptcy in February of 2008 and then shut down in March of this year), there seemed to be some optimism about the big picture, following a mediation session last week in Los Angeles that all sides portrayed as successful. Although there is a strict confidentiality order surrounding the mediation, sources familiar with the situation said the goal was to come up with a deal structure that would be acceptable to Credit Suisse and the owners of the resort, which is now in receivership. [more]

News Analysis

For those of you who just can't get enough of the Yellowstone Club story, I've written a couple of pieces for other publications that take a slightly more cosmic view of the story. My piece for TheAtlantic.com gives a concise history of the Yellowstone Club bankruptcy, and offers some props to Judge Ralph B. Kirscher for steering the case to a fair resolution. For The Big Money, a new business news and analysis site from the Slate Group, I wrote about the wreckage of Credit Suisse's Western resort empire, and what the lenders are likely to recover. When the Yellowstone Club loan was your best deal, you know things aren't looking too good.

Poor Little Rich Club Lives On

Marking the beginning of the end of a great Western soap opera, CrossHarbor Capital Partners today won a bitter battle for ownership of the bankrupt Yellowstone Club after reaching a settlement agreement with lender Credit Suisse.

The deal, which came in the wake of a disputed auction of the club late last week and was signed only minutes before today's court hearing, calls for CrossHarbor to pay $115 million in cash and debt for the club, in addition to providing a $15 million fund for trade creditors and up to $75 million in working capital going forward. The Credit Suisse lender group, which is owed $310 million, will get a new note for $80 million and could collect additional funds from a so-called "liquidating trust."

All unsecured creditors, with the exception of some members with special claims, should get paid in full under the deal.

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