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Yellowstone Club stiffs locals

post #1 of 5
Thread Starter 

Dec. 19 (Bloomberg) -- Builders, florists and blacksmiths are counting their losses along with financiers and hedge-fund managers in the bankruptcy of the Yellowstone Club, a private ski-and-golf enclave in the Montana Rockies.

The club, where Persian rugs line the ski lodge and a trail is named “Learjet Glades,” sought protection from creditors on Nov. 10, brought down by the founders’ divorce, profligate spending, and a real estate slump. Members like investment banker Robert Greenhill, founder of Greenhill & Co., want to know where their $250,000 deposits went. A local wastewater company wants its $5,472.

Many small towns in the U.S. Rocky Mountain region rely on rich people who come to fish, ski and play golf. Now some destination spots are becoming desperation spots. Idaho’s Tamarack Resort is being run by a court-appointed manager after defaulting on a $250 million loan at the end of 2007. Creditors forced The Promontory in Utah into bankruptcy in March.

“It’s a pretty big impact on all the people who got stiffed,” said Todd King, owner of Advanced Wastewater Specialists, who hasn’t been paid for treating effluent at the Yellowstone Club. With the recession, the timing couldn’t be worse, he said. “We definitely don’t want to work for free.”

The pain is acute around Bozeman, Montana, about 45 miles (72 kilometers) north, where many of the club’s workers live. The club employs 400 to 600 people, depending on the season, and has a monthly payroll of $882,000.

Gates a Member

It remains open after getting court approval on Dec. 12 for an emergency $19.8 million loan from club member Sam Byrne, founder of CrossHarbor Capital Partners LLC, a private equity firm in Boston.

Almost all members, including Microsoft Corp. founder Bill Gates, built lavish houses at the site, creating work for local contractors. For years, cement trucks thundered up the narrow road to the club, and a parade of pick-ups lined up at the security gate each morning.

The list of 700 creditors filed in federal bankruptcy court reads like a Yellow Pages of Bozeman and the surrounding area. A local florist is owed $17,285 and a blacksmith $1,095, for shoeing horses. Scenic City Portables, which provides portable toilets, is waiting for $12,430. Even Montana’s utility company is out in the cold: NorthWestern Energy is owed $247,000.

‘As Whole as Possible’

Mary Warmoth’s company, We Dust Control and Deicing Inc., sprayed dirt roads along the 18-hole golf course to control dust last summer. The club owes her $4,147.

“The thing that was the most shocking to us was that they knew they couldn’t pay the bill when they asked us to do the work,” said Warmoth. “One of the guys up there told our driver, ‘Good luck getting paid.’”
post #2 of 5
Too bad for all those working people. As for the rich, screw 'em!
It was a shame that a place like that could even exist. I'm glad it closed. Now they have to ride on the unheated lifts like the rest of us and with us, the poor things. Does any one have a tissue handy?
post #3 of 5
If I understand correctly, they are not closing, but just filing bankrupcy to "reorganize". I also understand that the "owner" of Yellowstone club is being questioned by the investors(like Bill Gates) as they have provided their $$ and wonder why bills have not been paid.
Do I understand this correctly?
At the end of the day, its the local working class that suffers at the hands of mismanaged $$ by a wealthy twit.
post #4 of 5
The problem with the Yellowstone Club is cash flow. On the books, its still is worth $200 million more than its debts. The problem is the club has lots of solid assets but little cash to pay their bills with. The bankruptcy filing to keep their creditors from starting foreclosure procedures by their major lendor who they can't make payments to.

By itself, the operation in the Big Sky area would probably be doing just fine even with the downturn in real estate sales. The problem is the founder, Blixseth, ran up a huge debt in recent years acquiring exotic, prime real estate around the world in an attempt to take his concept global.

Because the Yellowstone Club has a net positive worth it is very unlikely they are going to be allowed to stiff the locals they own money to. Unfortunately for the locals, it might be a while until they see their money which is making the tough times even harder on them, especially the ones that spent a significant amount of money on goods they sold to the Yellowstone Club.

The owners have obtained legal representation. They are not happy with how things are going and my bet is many are embarrassed by what has happened. People like Gates definitely don't want the added bad publicity this mess has brought.
post #5 of 5
On the books, its still is worth $200 million more than its debts.
Yeah, but that "book value" of mostly real estate isn't really worth that much in the today's world of depressed RE values.

Unfortunately for the locals, it might be a while until they see their money
Which unfortunately is going to cause significant cash flow problem for them!

So the domino effect will start and the end result will not be pleasent. Unless, someone steps in to inject some cold cash into this fine mess.

Just a mini-example of the "financial meltdown" we have nation-wide. The hope is, the required cash is small enough that someone WILL step forward and fill in the gap.
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