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In a ruling that averts a possible shut-down of the bankrupt Yellowstone Club, a federal judge on Friday gave final approval to a $20 million interim loan for the club from the Boston-based investment firm CrossHarbor Capital Partners -- despite the vehement objections of primary lender Credit Suisse. The ruling from U.S. Bankruptcy Court Judge Ralph B. Kirscher assures that the club can operate through the winter season and paves the way for the eventual sale of the property. But what the club is actually worth -- and whether it's anywhere near enough to pay off the $309 million owed to Credit Suisse and tens of millions owed to tradesmen and other creditors -- remains very much in question.

Yellowstone Club Financing Settled (For Now)

In a ruling that averts a possible shut-down of the bankrupt Yellowstone Club, a federal judge on Friday gave final approval to a $20 million interim loan for the club from the Boston-based investment firm CrossHarbor Capital Partners — despite the vehement objections of primary lender Credit Suisse.

The ruling from U.S. Bankruptcy Court Judge Ralph B. Kirscher assures that the club can operate through the winter season and paves the way for the eventual sale of the property. But what the club is actually worth — and whether it’s anywhere near enough to pay off the $309 million owed to Credit Suisse and tens of millions owed to tradesmen and other creditors — remains very much in question.

“I’m extremely happy that we’ll be able to tell members and employees that we’ll be open for the season,” said club owner Edra Blixseth, who gained control of the private ski-and-golf resort as part of her recent divorce settlement with Tim Blixseth.

Sam Byrne, a principal at CrossHarbor who is both a club member and the owner and developer of parts of the club property, expressed a similar sentiment: “I’m glad the club is staying open.”

Credit Suisse, which is desperately trying to salvage a series of ill-conceived resort loans around the West, had tried to block the CrossHarbor financing on the grounds that it did not provide “adequate protection” for Credit Suisse and the bondholders to whom it sold the debt. But its position was severely undermined when it failed two weeks ago to come up with the money for its own interim financing plan.

Mark Chehi, an attorney with the corporate law firm Skadden Arps and the lead lawyer for Credit Suisse, indicated that the bank might appeal the ruling. Any appeal, however, would not be aimed at blocking the $20 million financing itself, which (with an additional $5 million in member payments) will only carry the club through the winter anyway. Rather, the bank and others are concerned about the precedent the ruling could set, as it is highly unusual for a secured lender to lose its “first lien” position on property in connection with a Chapter 11 bankruptcy.

Testimony in the two-day hearing focused in part on Credit Suisse’s contention that there had been inappropriate collusion among CrossHarbor, Edra Blixseth, and Discovery Land Co., which has been retained to manage the property. While CrossHarbor, Blixseth and Discovery were clearly working on plans to salvage the club prior to the November bankruptcy filing, the judge appeared to find little merit to the claim that CrossHarbor had Edra Blixseth “over a barrel” and was thus able to pressure her into supporting its plan. CrossHarbor had lent Blixseth $35 million against her massive Palm Springs estate, called Porcupine Creek, to enable her to buy out Tim Blixseth in the divorce.

(That loan is now in default, though foreclosure proceedings have not begun. Employees and vendors at Porcupine Creek have told NewWest.Net that they have not been paid for many weeks; Edra Blixseth on Friday would neither confirm nor deny those allegations.)

CrossHarbor, which specializes in real estate and distressed debt, had attempted to buy the club from Tim Blixseth beginning last year, but the deal fell apart in the spring. CrossHarbor remains the most likely buyer for the club, which has about 300 members, including celebrities and billionaires such as Microsoft founder Bill Gates. Credit Suisse contended that CrossHarbor, by providing the $20 million “debtor in possession” financing and gaining first lien on the assets, would be able to manipulate the sale process to its benefit. Judge Kirscher, however, made it clear that he would control the sale as part of the bankruptcy proceedings.

The hearing also featured lengthy discussion of a French estate called Chateau de Farcheville, which was acquired by the Blixseths two years ago as part of a plan to develop a super-luxury vacation timeshare called Yellowstone World Club. The castle, as it was repeatedly referred to in the hearing, is not technically owned by the Yellowstone Club, but rather by a chain of shell entities that are ultimately controlled by Blixseth Group Inc., which in turn is now owned by Edra Blixseth. She pledged the castle, said to be the most expensive estate in Europe, as collateral for the CrossHarbor loan.

Edra Blixseth had planned to sell Farcheville earlier this year to salvage her and the club’s finances, but a deal to sell the property for about $60 million fell through this fall. What the property is really worth in today’s market is anyone’s guess, but the judge was apparently satisfied that it was likely worth more than $20 million and therefore provided some additional protection for Credit Suisse, since it would be the first source for repayment of the CrossHarbor loan.

The judge also focused on $275 million in promissory notes from Blixseth Group that are held as collateral by Credit Suisse. Those notes were created when the Blixseths took more than $200 million of the original $375 million Credit Suisse loan for various property purchases and their own personal spending. Future chapters of the Yellowstone Club drama are likely to focus on where all that money went, and whether those promissory notes are worth anything.

About Jonathan Weber

Comments

  1. Sharkbait says:

    Wonder why the judge did not ask Edra or any other players how they got to Miz or what type of jet they were flying in?! Maybe a Gulfstream IV or two at a cool 14K to 18K an hour to fly. How about that! Their jets can and have been tracked on Flightaware.com. Bet NEW WEST did not say anything about that. Mr. Editor, shame, shame, shame for the deletions and you should shut down the blogs especially since you have an agenda of not posting facts about the players involved. No one should contribute or read anything written at NEW WEST!

  2. Searun says:

    I’m beginning to feel the same as Sharkbait. New West development reporting isn’t really about the new west in transition but rather a thin shell for the development carpetbaggers activities. I wonder if Rick Holly is on your board?

  3. Privatepowder says:

    Lets give NEW West a break. Clearly they only report what is in their interests and they have every right to do this. They and the shareholders own the paper. So if everyone wants to control the media then go start your own newspaper. Poor New West, Poor Tim Blixseth, etc. You get the point. The only way to get to he bottom of things is finding a resource willing to report the facts and the truth but this is very had today as newpapers rely on advertising and people to keep their lights on. Lawyers do not help either when such small town papers get calls from the east coast. Why is it Bozeman Cronicle able to write on the facts in their last article when in fact on this blog page by facts given from Sharkbait actually were found to be true? Why when Shark bait called the paper, they did not listen?

    In any event, this story is old. Boston was the winner, Edra was the losser, Tim was the big winner and well, this world is full of greed, just look at the new 50B scandal. All the funds appear to be scams.

    Give Boston Boys a chance, afterall, they wold never put this into Chapter 7, they want to save the club rmember. Stay tuned, March 31 is around the corner and the true colors will be shown to all. When the snow is melting, employees will be on the unemployment line in most cases, members will fly back in their leased jets, back to the East coast, some will be indicted for fraud like all the others and NEW WEST will merely say the market got worse and is the reason this all went into Chapter 7 right?

    Producers, are you for real, you would actually report the truth if given the facts? Why? are you not controled by the east coast as well and not afraid to take threatening phone calls for character assasination?

  4. The fan says:

    Sharkbait, 12-14-08

    Grow up, You are upset at the club that is transparent, But now you are bad mouthing New West. Are you kidding me. Do your parents know you are on the computer……GROW UP

    THE FAN

  5. Sharkbait says:

    Fart Fan,

    Did you read anything I wrote before New West deleted it? I am not upset at the YC besides it is a awesome place with many awesome members who have been very gracious to me personally. I only feel that Tim and Edra got greedy and basically drove the place into the ground. Maybe if all the money was spent improving the place instead of the lavish lifestyle it could of weathered the storm?.
    I am upset at New West’s deletions because they were fair and accurate. You tell me to grow up? Wake up! Press and publications who choose their agenda to manipulate public sentiment NEED to be called onto the carpet! I spoke with New West on the phone and told facts to Bob Struckman. He never called me back, in fact, New West only sent an email that was to my above name. So on one hand they want facts via email but not by phone. Interesting because I did disclose my name, but I was concerned about confidentiality and safety. I know what Timmy is capable of. Do you? I doubt it!
    For the record I have and will continue to be critical of the people who perpetuate fraud as it relates to stealing from others and those who have an agenda to minimize the damage to the TAKERS, and SKIMMERS, most of which are still carrying on business as usual. The biggest Ponzi scheme ever is Social Security, so we should all wake up!

  6. Blxwareconcern says:

    Just a note for those who are interested. In the press in September it talked about Blxware settling a long lawsuit with W. Trepp. This entity is owned by the present owner of Yellowstone Club. I am careful not to mention any names to be respectful but assume everyone knows who the present owner of the club is at this stage.

    A new lawsuit has been lodged in Nevada, claiming a default of the settlement for 20 million. According to the filing, Doc 56, the owner of the club was to make a payment of 1.5 million, further pledge assets worth 40 million and make 3 payments of 6 million over three years. The matter (Trepp) is now seeking the full 20 million plus damages as the deadline was December 15, 2008.

    Unless the owner of Yellowstone Club provides a security package of 40 million and pays the default payment of 1.5 million, then they will have a formal judgement to pay the entire 20 million plus interest and damages.

    Can anyone advise how a person pays 20 million in today’s market while at the same time according to the press owes a further 35 million to apparently the Boston Investment Group? How is this possible knowing the owner has already placed their main investment called Yellowstone into Chapter 11? Are we looking at a small Madoff issue or is it normal to owe so much money in today’s market? Advice from anyone as jobs are at risk in Blxware so we feel like Yellowstone employees except they received the bailout from Boston. Can someone bail out this problem for us?

  7. Porkerscreek says:

    Hey Blxwareconcern, just look up the street, no one at PC has been paid in over a month.

  8. Mehmnet says:

    They just laid-off people today. It’s only going to get worse. i don’t know why there is this sense of “hope” in the air. The whole House of Cards is coming down – nothing can prevent it.

  9. Blxwareconcern says:

    Pokerscreek,

    Sorry I live in Seattle but am aware of the office below Porcupine Creek. Seems like so many lives are at stake and right before the holidays. Can anyone come up with a great idea to help out so many broken promises? The news of Blxware, the scientist and the owner of Yellowstone having to pay another 20m in promises.

    We have heard that many of the staff were let go at Porcupine Creek. This was I am sure a hard decision as the owner treats everyone like family at that place but given she has no money for Yellowstone, no funds for Blxware one really does not have a choice. Surely there must me an IT investor out there somewhere to throw us a life line as we have great technology. CrossHarbor did it for Yellowstone so why cant the big members who are in IT consider investing into Blxware? If anyone has some thoughts on how to save a great software company it would be appreciative. We are not upset with Warren Trepp, after all we were not told of the 20m Promissory note, only that the matter was settled and that he would receive part of the profits. These are two different settlements. He wants his money clearly as he filed the very next day it went into default. We would prefer to have a new owner at this stage and get out of the ‘Drama’ around the famous ‘Blixseth Saga’. If there was every a Rise to Billionaire Status to Flat on your back scenario’ this won takes the award. One point, does anyone know if she is still flying around in her private jet when she owes employees wages for the Christmas holidays? We heard she fly to Montana many times as well as California. Just think of the savings and cash available to the people who are still working for her and trying to help her. How sad.

  10. Porkerscreek says:

    The staff at PC were sent home last week supposedly on a paid leave. Some have been called back, but still no one has been paid. It’s a misconception that employees are treated like family – servants perhaps, but definitely not family. Sad so sad.

  11. Mehmnet says:

    There will be plenty of smoke blown to ensure that all seems “upbeat” at the YC. This is how big business operates: “Never say ‘never’ “. But don’t believe a word of what you read as far as it being “business-as-usual”. There’s more “heartache” to come.

  12. The Fan says:

    I guess the bomb threat at the WML should be a hint

  13. employee.... for now says:

    I thought it was funny that while the fire department was looking through the lodge with the sheriffs deputy nobody was evacuated. The fire guys just said they were looking for out of place stuff, but I heard that management didnt want to let anybody know what was going on. I hope the members get involved and express some disatisfaction on how things are going here. What if it had been real???? The employees who got let go will have thier last day Christmas Eve, Merry Christmas to you from YC I guess. Everyone here understands that changes need to be made, but quit screwing with the employees.

  14. Porkerscreek says:

    Have the employees or vendors at YC been paid yet ?

  15. Jonathan Weber says:

    Porkerscreek, and others who may be interested:

    I spoke with the restructuring officer and all employees are currently being paid in a normal fashion. Vendors and contractors should also be getting paid in a normal fashion for any and all work done AFTER the bankruptcy filing. This is a crucial distinction. In a bankruptcy there is a hard line between “pre-petition” debt, which is unsecured debt and has to get in line with all other unsecured debt (and might or might not get paid off in full or in part as part of the re-organization plan), and “post-petition” payments, which are treated as administrative claims and are at the front of the line and should be paid normally. Hope that helps clarify.