Hermitage auction proceeds
BURLINGTON — A bankruptcy auction of Hermitage Club properties — including a ski resort at Haystack Mountain in Wilmington, a golf course and several inns — will go on as planned.
On Wednesday, Judge Colleen A Brown rejected a motion by Hermitage founder Jim Barnes to delay the auction by 60 to 90 days as COVID-19 grips the nation and caused havoc to financial markets.
Brown said the court finds no guarantee the stalking horse bidders, or initial bidders who provided agreeable terms to kick off the auction, would proceed if the timeline is extended. She worried a delay could bring "significant risk" to the sale.
Only secured creditors will be paid from the proceeds, Brown said, noting they all opposed the motion. She allowed for the auction to proceed 10 a.m. Friday by telephone, as had been expected by parties earlier this week.
"That's the way the pandemic is having an impact," she said. "But I don't see any detriment to the quality or proceeding of this auction due to it being done by telephone."
Janice B. Grubin, attorney for Barnes, told the court her team planned to appeal the order. Brown denied a motion for a stay or pause of the proceeding, stating there is a "very high standard" to allow one and "timing issues could cause irreparable harm."
Her decision came after objections to the motion piled up.
"There is no crystal ball that can project when or if economic conditions will change sufficiently so that these unnamed potential bidders will consider it prudent to submit a bid," attorney David Dunn of Phillips, Dunn, Shriver & Carroll of Brattleboro wrote in a court filing. "Quite simply, granting the Motion would create substantial risks with no guarantee of any upside to any party ..."
Dunn is representing Barnstormer Summit Lift LLC, a group of former club members who invested in a six-person bubble chairlift. He said granting the motion could result in the loss of the initial bidders who have contracts in place.
Rainmaker Mountain offered $4 million for the Haystack ski area, Haystack Golf Course, and several inns. Boyne USA Inc. submitted a $3.6 bid for the Barnstormer chairlift.
Boyne is expected to relocate the equipment to another resort this summer if it ends up winning the auction. By delaying the sale, the company might not have enough time to do so, which could prompt the group to try to terminate its contract, wrote Dunn.
Barnes' motion did not identify the names of potential bidders who planned not to participate given the pandemic. Dunn said the evidence submitted by Barnes' attorney is only an email from an advisor.
"Apparently this potential bidder is dependent on financing, and any bid containing a financing contingency would not be a qualified bid pursuant to the Court's previous orders," Dunn wrote. "The Affidavit also mentions an unnamed 'multi-billion dollar U.S investment firm' as a potential bidder. If there is such a potential bidder, no evidence is offered to support the inability of such a well-endowed bidder to submit an opening bid of just over $8,000,000."
No bidder has filed a motion requesting a delay in the process, he added.
Dunn took issue with the suggestion that current events could reduce bid amounts "to the detriment of all the debtors' creditors and stakeholders." He said the bank's claim of more than $22 million and Barnstormer's claim of more than $10 million "effectively negate the possibility of any distribution of excess proceeds to Debtor's unsecured creditors, as no one has indicated a belief that the Debtors' assets will net a sale price even approaching $20,000,000."
Dunn also challenged the idea that delaying the auction would still allow time for the new owner to open for next winter.
"This is apparently based on the knowledge he gained by investing (according to his claims) over $55,000,000 in the operation of Haystack and managing it into a Chapter 7 bankruptcy where substantially all of the assets are under contract to be sold for less than $8,000,000," Dunn wrote. "Mr. Barnes completely ignores the real possibility that the Barnstormer Lift may be removed after a June closing and a new owner would have to purchase a new lift and have it installed and fully inspected after the removal of the Barnstormer Lift."
Chapter 7 Trustee Raymond J. Obuchowski and the Ad Hoc Committee of Members, a group of former club members given permission by the court to participate in the hearings, shared the same reasoning for objecting to the motion. And Berkshire Bank had similar concerns.
"No one could have predicted the COVID-19 pandemic and corresponding economic uncertainties, and at this time, no one can predict what the outcome will be regarding these matters or how long it will take for economic conditions to improve," states an affidavit submitted by the bank's attorney Elizabeth Glynn of Ryan Smith & Carbine of Rutland.
Glynn said the initial bidders agreed at an earlier hearing to extend the sale date from Feb. 25 to March 20 even though that did not benefit either one, then the bank hired a firm to market the real estate. She said those bidders have agreed to continue with the sale.
The bank has relied on the closing happening next month as it pays maintenance costs and a court-appointed receiver to preserve the properties, Glynn told the court. She said the closing also is needed in order for Cold Brook Fire District to make an upcoming bond payment.
Cold Brook and the Hermitage had an agreement to take out a $3.1 million bond to expand sewer/water infrastructure to keep up with Hermitage-related development. The district objected to the motion for the reasons outlined by the bank. Ed Adrian, attorney for the town of Wilmington, also objected and cited all the reasons raised by other parties.
Hermitage Club Member Group Inc., created by former club members who submitted a $8,060,000 bid for the real estate and chair lift in hopes of running a club, called the motion "a convenient invocation of a public health crisis for personal advantage."
"I will not respond to that," Grubin told the court. "But I find it to be a shocking statement."
Hermitage Club Member Group's proposed operator advises that "any delay in the acquisition date will impair the time within which it must operate the golf and ski facilities to perform in accordance with its financial models and to honor the commitments made to its fellow members in raising the acquisition funds," wrote attorney Peter J. Haley of Nelson Mullins Riley & Scarborough of Boston.
Reach staff writer Chris Mays at firstname.lastname@example.org, at @CMaysBR on Twitter and 802-254-2311, ext. 273.
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