BURLINGTON — Hermitage Club founder Jim Barnes is asking to consolidate appeals he made concerning his request to postpone a bankruptcy auction in March due to the coronavirus pandemic and objections he made over the sale of assets to former club members for $8.06 million.
"Consolidating the appeals for briefing and argument would spare the parties and the court needless duplication of effort, and overall make more efficient and streamlined the court's consideration of the appeals and the substantively similar issues they highlight," William E. Whittington of Whittington Law Associates of Hanover, N.H., attorney for Barnes, wrote in a motion.
The bankruptcy auction Barnes sought to delay resulted in the Hermitage Members Club acquiring the ski resort at Haystack Mountain in Wilmington, the golf course, the Hermitage Inn, Snow Goose Inn and Doveberry Inn and the Horizon Inn. The group of former Hermitage Club members was created for the purchase.
Janice B. Grubin, attorney for Barnes, attempted to stay the auction proceeding on the grounds that attempts to market the properties were not adequate. U.S. Bankruptcy Court Judge denied the stay, saying Barnes had "ample opportunity and notice to appear as recently as Jan. 31 and he failed to do so."
"I believe the sale of the debtors' assets, which had been appraised 'as is' in November 2018 at $50 million and had a book value of $89 million as of the commencement date of the bankruptcy cases, would have been meaningfully higher and benefited the estate and all creditors had the auction been postponed for 60 to 90 days as requested in my emergency motion," Barnes said in an affidavit filed Tuesday in the U.S. Bankruptcy Court for the District of Vermont. "This short pause would have provided a reasonable opportunity for other better funded, professional investors with operating experience in luxury resorts like the Hermitage to participate in the bidding and thereby create a more robust auction with substantially higher bids than the minimum amount that won the auction."
Barnes said he was speaking with private investors including informal groups made up of club members — some of whom were "disgruntled members" of the Hermitage Members Club — before the president of the United States and governor of Vermont issued emergency declarations due to the virus. He asked the court to delay the sale, citing challenges he said different parties were facing in response to the pandemic.
His request was denied on March 18. The auction was held two days later.
In the affidavit, Barnes described himself as chairman of a management committee of Hermitage Inn Real Estate Holding Company, and manager of Hermitage Club LLC. The two companies filed for bankruptcy in May 2019.
"In addition to my status as the sole individual equity owner of the companies, I am also an unsecured creditor in the bankruptcy cases with total claims of $58,082,000, consisting of $1,925,000 of compensation I deferred while the companies were financially struggling both prior to and after the bankruptcy cases were commenced, $1,500,000 of club memberships I purchased, $11,200,000 of loans from an irrevocable trust I had settled in 2007 for my children, and $45,457,000 of my own funds from cash on hand and from mortgages on my residences that I loaned in order to financially support the companies," he said in the affidavit. "These amounts do not include the approximately $25,000,000 of personal guarantees I provided in support of secured (and unsecured) loans from private parties and banks that the companies borrowed to fund their rapid expansion and growth, and on which I continue to be subject to collection efforts by such lenders."
Barnes said he is in contact with an investor whose purchase of the assets would lead to a better outcome for creditors and his companies.
"I have had and continue to have an active and ongoing relationship with the principal of a Boston-area family office who remains highly interested in acquiring the debtors' assets within the bankruptcy cases, should that opportunity be presented as a result of these appeals or otherwise," he said. "This investor has completed substantially all due diligence, except for a physical site visit to Vermont to inspect the properties, would be prepared to immediately pay cash with no financing contingencies, have no substantive modifications to the purchase agreement, and be prepared to close within a matter of several days. This investor would pay a premium well in excess of the successful bidder's purchase price in order to provide greatly enhanced value to the secured creditors and the debtors' estate."
The member-owners of the Hermitage Members Club had no comment on the appeals.
Reach staff writer Chris Mays at email@example.com and at @CMaysBR on Twitter.