HARTFORD, CONN. — Two companies that ran the Hermitage Club filed for voluntary Chapter 11 bankruptcy and are looking for approval for financing up to $1.75 million to reorganize.
"I have reviewed the first day pleadings or have otherwise had their contents explained to me and, to the best of my knowledge and insofar as I have been able to ascertain after reasonable inquiry, I believe that approval of the relief requested therein is necessary to minimize disruption to the debtors' business operations, permit an effective transition into Chapter 11, and preserve and maximize the value of the debtors' estates," Hermitage founder Jim Barnes wrote in an affidavit filed in the U.S. Bankruptcy Court for the District of Connecticut.
"I also believe that absent access to financing and otherwise maintain business operations ... the debtors would suffer immediate harm to the detriment of their estates, creditors and other stakeholders."
His companies, Hermitage Club LLC and Hermitage Inn Real Estate Holding Co. LLC, filed Chapter 11 bankruptcy petitions Tuesday. A form notes that bankruptcy had already been filed against Hermitage Inn Real Estate Holding Co.
Three creditors filed an involuntary Chapter 7 bankruptcy petition against the company last week in a federal bankruptcy court in Vermont, where it ran a private ski resort at Haystack Mountain, golf course, inns and restaurants before the state shut down its business operations last year for failure to pay sales and use taxes. Berkshire Bank filed a foreclosure complaint in February 2018, prompting Windham Superior Judge John Treadwell to appoint a receiver to preserve and maintain Hermitage properties.
Restructured Opportunity Investors Inc. is proposed to lend up to $1.75 million for reorganization at an annual interest rate of 5.5 percent. The plan includes hiring a chief restructuring officer, funding payroll, maintaining resort properties, paying insurance and other fees, and having a meeting with club members where at least 65 percent of them agree to start paying all of their monthly dues.
If approved by the court, Restructured Opportunity Investors would provide "debtor-in-possession financing," which is described on investopedia.com as "a special kind of financing meant for companies that are financially distressed and in bankruptcy. Only companies that have filed for bankruptcy protection under Chapter 11 ... can utilize it, which usually happens at the start of a filing."
More than 200 creditors are owed, according to the bankruptcy form. The 20 largest include Haymaker Investments LLC, which is owed $1.5 million for investment memberships; Don Griesdorn of Naples, Fla., who is owed $1.3 million for a deposit on real estate; Rob Girschek of Boston, who is owed $700,000 for investment memberships, the Tanaglia brothers of Wildwood, N.J., who are owed $600,000 for investment memberships, run IVJMA LLC of Wildwood, N.J., and took back ownership of the formerly Hermitage-owned Inn at Sawmill Farm in West Dover after a foreclosure auction last summer; Bob Rubin of West Dover, former Hermitage interim president and vice president of construction who is owed $500,000 for a membership investment and bridge loan; Douglas Hollenbeck of Westerly, R.I., who is owed $500,000 for a investment membership; G2 Capital of Boston, which is owed about $410,012 for advisory services; Dan McLeod of Stamford, Conn., who is owed $350,000 for an investment membership; Carmen Martocchio of Vernon, Conn., who is owed $300,000 for an investment membership; Joseph Natarelli of New Haven, Conn., who is owed $285,158 for accounting services; Joseph Willen of Northport, N.Y., who is owed $250,000 for an investment membership; Steven Albert of Armonk, N.Y., who is owed $200,000 for an investment membership; Rob Aubin of Londonderrry, who is owed $200,000 for an investment membership; Kevin Siebrecht of Brookfield, Conn., who is owed $200,000 for an investment membership; Dana Nielsen of Weston, Mass., who is owed $200,000 for an investment membership; Bill Russell of Fairfield, Conn., who is owed $200,000 for an investment membership; Lorista Holdings of Wallingford, Conn., which is owed $162,000 for rent and leased the Wilmington inn known as the Vermont House to the Hermitage; 8 Stags Leap LLC of St. Petersburgh, Fla., which is owed about $161,103 for rent; Rogger and Isabelle Alvarado of Weston, Conn., who are owed $159,600 for an investment membership; and Sean Winters of St. James, N.Y., who is owed $150,000 for an investment membership.
"The filing of this case imposed an automatic stay against most collection activities," according to a notice of the case. "This means that creditors generally may not take action to collect debts from the debtor or the debtor's property. For example, while the stay is in effect, creditors cannot sue, assert a deficiency, repossess property, or otherwise try to collect from the debtor. Creditors cannot demand repayment from the debtor by mail, phone or otherwise."
A meeting of creditors is scheduled for July 1 at 10 a.m. in Room 309 at the Giamimo Federal Building in New Haven, Conn.
HIREHC formed in 2007 to purchase the Hermitage Inn in West Dover, according to a motion for an order to authorize the company to obtain post-petition financing. The company "expanded its operations and purchased the nearby Haystack Mountain ski resort and an adjacent 18-hole Desmond Muirhead-designed championship golf course. The club was organized at that time with the intent to develop the resort into a private, members-only facility with 450 private homes and condominiums to be built on site. Development of the project commenced and ski lifts were installed to link the inn to the ski mountain. Club membership interest was sold at an even pace to achieve the goal of 1,500 members and 450 residential properties on site."
Within two years, Hermitage operations "expanded to include the Snow Goose Inn, White House Inn, the Inn at Sawmill Farm, and a local airport property with an additional 450 acres for building lots and expansion of the existing runway," according to the motion to obtain financing. "The purchase of the airport property proved to be troublesome for the debtors. The... Vermont [Agency] of Natural Resources took the position that the common ownership of the resort and the airport property through HIREHC provided grounds to re-evaluate permits already issued by the state. The state ... slowed the permitting process as it evaluated impact on the local area. The sale of club memberships decreased dramatically. Because of the financial distress caused by the declining sale of Club memberships and the lingering permitting issue, it became necessary for HIREHC to sell the airport property and additional acreage to maintain operations. The decline in membership sales and real estate sales resulted in default in payment of sales and use taxes owed to the state."
In an affidavit, Barnes said the Hermitage is "confident that given its state-of-the-art facilities and favorable geographical proximity to millions of potential members, the company can use the Chapter 11 cases to successfully gain access to the additional capital and liquidity necessary to reopen and continue to upgrade the resort and its facilities, reassure and expand its membership base, restructure its balance sheet and negotiate the terms of a plan of reorganization."
On Wednesday afternoon, Barnes said he could not yet comment on the developments.
Reach staff writer Chris Mays at email@example.com, at @CMaysBR on Twitter and 802-254-2311, ext. 273.