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The Yellowstone Club bankruptcy saga continues in a Butte courtroom today, with lawyers arguing over who should be charged with trying to collect on $275 million in promissory notes that were issued to the club in 2005 by Blixseth Group Inc. (BGI) - the family holding company once owned by club founders Tim and Edra Blixseth and now controlled by Edra. The notes were created when the Blixseth's took for their own purposes some $270 million of the $375 million that was loaned to the club by banking giant Credit Suisse - a transfer which had the approval of the bank, but ultimately led to the club's current financial crisis. Matthew Brown of the Associated Press does a good job of tracing the sequence of events in his story today. In a court filing this week, attorneys for the committee of unsecured creditors, which represents a wide range of entities and individuals that are owed money by the bankrupt club, asserted that the original diversion of funds to BGI meant that the Credit Suisse loan was a "fraudulent conveyance" - a significant allegation which could ultimately result in the bank being liable for the money. Update: Bankruptcy Judge Ralph Kirscher on Tuesday approved a proposal enabling Credit Suisse and the creditors committee to jointly pursue collection of the promissory notes.

Yellowstone Club Creditors Assert Fraud by Credit Suisse

The Yellowstone Club bankruptcy saga continues in a Butte courtroom today, with lawyers arguing over who should be charged with trying to collect on $275 million in promissory notes that were issued to the club in 2005 by Blixseth Group Inc. (BGI) – the family holding company once owned by club founders Tim and Edra Blixseth and now controlled by Edra.

The notes were created when the Blixseth’s took for their own purposes some $270 million of the $375 million that was loaned to the club by banking giant Credit Suisse – a transfer which had the approval of the bank, but ultimately led to the club’s current financial crisis. Matthew Brown of the Associated Press does a good job of tracing the sequence of events in his story today.

In a court filing this week, attorneys for the committee of unsecured creditors, which represents a wide range of entities and individuals that are owed money by the bankrupt club, asserted that the original diversion of funds to BGI meant that the Credit Suisse loan was a “fraudulent conveyance” – a significant allegation which could ultimately result in the bank being liable for the money.

Technically the promissory notes are the property of the club, which would have a strong interest in trying to collect on them. But the club is now owned by Edra Blixseth, who also controls BGI, and thus there is an obvious conflict in that Edra would effectively be collecting from herself. (Tim and Edra divorced last year). Credit Suisse, which physically holds the notes as collateral for its loan, would like to lead the collection effort, but the committee of unsecured creditors doesn’t want the bank to be able to collect for itself at the expense of other creditors.

The committee’s legal filing states: “The Committee believes that Credit Suisse’s loan to the Debtor’s in 2005 was a fradulent conveyance under Montana State law. So it contests the extent, validity and priority of Credit Suisse’s liens, including its security interest in the notes.”

The argument over who should collect on the notes is a kind of shadow play. It seems clear that BGI – which Tim Blixseth’s lawyer told the Associated Press is now solely owned by Edra following their divorce – doesn’t have any money; Edra has defaulted on numerous obligations in recent months, including the mortgage on her Palms Springs estate, and rent and salaries at various companies she controls. At best, BGI appears to have assets – including a castle in France – which are expensive to maintain and virtually unsaleable in the current market.

Thus far, Tim Blixseth has managed to avoid any involvement in the bankruptcy case. But he continues to own properties – including a private island in the Caribbean, an estate in Mexico and an historic ranch near Cody – that appear to have been purchased at least in part with the Credit Suisse loan funds. The bank agreed to let the Blixseth’s take the money in the first place as a repayment and dividend on their initial investment in developing the Yellowstone Club. But if that transaction is ultimately found to constitute a fraudulent conveyance – essentially a deal in which one party never delivered its end to the other – that could potentially expose both the bank and Tim Blixseth to legal claims.

Update: Bankruptcy Judge Ralph Kirscher on Tuesday approved a proposal enabling Credit Suisse and the creditors committee to jointly pursue collection of the promissory notes.

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4 comments

  1. Apologies to everyone; I must have engaged in a bitter dispute with Stephen so I apologise to the readers as our differences should be made in a different forum. Therefore, it appears the only way to get things out in the open with out the fear of being harmed by others physically, the best is to do an email campaign to the members of yellowstone club, the suppliers, the banks, the current employees, the girlfriends, and to those who have secret relationships which are still in the closet.

    I wish to state that the Editor is being fair and has reached out to me as I have a valid email and he has promised to insure my house will not have a gas leak or my face smashed in by revealing my identity. I believe in fair reporting and so far the articles of New West are fair and accurate.

  2. Blockhead,

    Wow, looks like I missed some interesting discourse. I have no idea what you are talking about, but, sounds like you got somewhat riled up. I’m assuming it was either on a different thread, or deleted by the editor.

  3. It now appears that Credit Suisse will recover all the Yellowstone World Club properties and even the ones that were sold by going after the proceeds says a close insider. I believe a certain two people better start hiding the cash quickly if they have any? Scary to think? Troy, you missed nothing, rather I was out of line in my truthful comments but this is not the place to accuse people, after all this is what montana courts and the Federal Prison System is for right?

  4. Blockhead,

    I do not think you owe anyone an apology. You simply stated facts and you nervousness about Blixseth knowing who you are because you, as well as I, know what he is capable of. I got to read your statements before Mr all mighty deleted them. Many of my factual statements have been deleted so that is par for the course at NEW WEST. I mentioned the other equity holders several times and brought up legitimate issues including the 33% of the timber company given as repayment for a loan just before Credit Suisse closed. This so called news publication does not care! They must be feeling some intense heat!

    Troy, you did miss some interesting facts and info, but you know what he is capable of, also. You still got that little dirt bike you rode around on? I hope you are well as I have not seen you for a while. You keeping your hair the same color these days? Just joking around a bit. I admire you being frank and candid about the club and the reasons you joined. I believe the early members only wanted the same, fun, family, and great skiing. Do you think he is truly gone or is he somehow involved with hidden assets there? Take good care, Troy, and please be safe in the trees!