BURLINGTON — Judge Colleen Brown issued an order to consolidate the Hermitage Inn Real Estate Holding Company's voluntary Chapter 11 case with the involuntary Chapter 7 case filed by three creditors.
"We want to keep things moving along," attorney Jess Schwidde, representing creditor Bobbi Resek who once handled memberships and sales at the Deerfield Valley-based club, said Tuesday in United States Bankruptcy Court for the District of Vermont.
Brown previously ordered that the cases be heard in Vermont.
The Chapter 7 petition, which seeks liquidation, had been filed in Vermont in May. And the Chapter 11 petition, which was filed in Connecticut the following week, aims for reorganization.
A joint stipulation for consolidating the cases was submitted by attorneys for the Hermitage, the three creditors who filed the involuntary Chapter 7 petition, the Ad Hoc Committee made up of club members who have supported the Chapter 7 route, and the Barnstormer Summit LLC, which is a group of club members who are owed money they had lent to install a new chairlift at the Hermitage's private ski resort at Haystack Mountain.
"By executing and filing this stipulation, the parties (other than the debtor) do not waive their right to seek conversion of the consolidated Chapter 11 case to a case under Chapter 7 nor to appointment of a Chapter 11 trustee," the agreement says.
The stipulation "seemed to be an acceptable approach from my perspective," said attorney Douglas Skalka, who represents the Hermitage.
He told the court reorganization would lead to "the highest recovery for creditors" but he has not yet reached an agreement with attorneys on how to proceed.
The reorganization plan is focused on merging the Hermitage with a publicly traded company, establishing a board of directors and repaying creditors with interest and equity.
Skalka presented some testimony on securing insurance for Hermitage properties, which he said have been appraised at about $50 million.
The Hermitage is looking for court approval to enter into an agreement with FIRST Insurance. The total cost of an approximately yearlong policy would be about $210,623, according to a motion submitted by Skalka.
"The debtor believes, in its business judgment, that the assumption of the premium finance agreement is critical to their reorganization efforts," he wrote. "The debtor and club are obligated to maintain adequate insurance on their assets in compliance with the requirements of Chapter 11 cases ... There is minimal risk to the debtor in the assumption of this agreement."
The policy is "a big expense for a place that is shut down, hasn't been operational." said Elizabeth Glynn, who represents Berkshire Bank, which foreclosed the Hermitage ski resort, golf course and several inns last year. Hermitage establishments were subsequently shut down after sales, rooms, meals and alcohol tax bills went unpaid.
"The debtor has no funds," Glynn told the court. "The bank has made no secret of it believes there should be a liquidation of this property."
Glynn called the motion related to the insurance agreement "premature."
"We don't know what this covers," she said. "We need to see the policy. We need to see what exclusions there are."
Brown said the court will continue the hearing July 12 in Rutland. Motions made by the Hermitage on insurance and debtor-in-possession financing for its reorganization efforts will be addressed.
Reach staff writer Chris Mays at cmays@reformer.com, at @CMaysBR on Twitter and 802-254-2311, ext. 273.
