Hermitage Club members divided on path forward
WEST DOVER — Hermitage Club members participating in bankruptcy proceedings for companies that ran the now-shuttered private ski resort at Haystack Mountain and golf course are not all on the same page.
More than $198,600 has been raised in a crowdfunding effort over the last two months. Members were asked to contribute $1,030 to support the Hermitage Club Member Restructuring Committee and cover various costs to have members' voices being heard but not every donor has agreed with the committee's approach.
"I am aware that you have engineered the filing for Chapter 7 liquidation of the Hermitage entities and are claiming the support of the contributors to the funding of the ad hoc committee for this," club member Robert Coffin wrote in an email to Anthony Coniglio. "However, I merely contributed to support the best interests of the club and all constituents going forward, whatever the best path forward turned out to be, and to aid in determining what that path should be."
The committee has been raising funds for members to have "increased influence and control over the club's financial reorganization, as well as try to get the club re-opened," Stuart Kovensky, a member of the steering committee for the ad-hoc committee, wrote on gofundme.com/hermitage-club-member-restructuring-committee, where donations have been collected. "To this end, we have already engaged two separate law firms and expect to use the bulk of the funds raised to cover legal due diligence costs. In addition, we may use the funds to pay for other due diligence related to the club's finances, real estate operations and other areas integral to the club's operations and restructuring."
Berkshire Bank foreclosed Hermitage properties in February 2018 and the Vermont Department of Taxes shut down the company's establishments the following month for failure to pay taxes. Hermitage Inn Real Estate Holding Company LLC and Hermitage Club LLC filed a Chapter 11 bankruptcy petition late last month.
"All the constituents want the club to reopen," Hermitage founder Jim Barnes said in an interview last week. "We had a year of it being closed. Everyone who was a member loved the experience in the past and they really want to see it reopened."
Barnes said the involuntary Chapter 7 bankruptcy petition filed earlier against the company by three creditors is "not good for anybody."
"It's definitely not good for a local vendor and that's why we don't support that," he said. "We don't want our name on that. We want to see this rebuilt for everyone's benefit and fairness."
Members who donate to the crowdfunding effort become part of the ad-hoc committee. One member called the committee "a serious and focused group of members committed to strongly representing the interests of all of the members who collectively made the Hermitage vision a reality and want to bring it back in a strong, transparent and trusted form."
"This is not a lot of money to ask for," wrote another on the GoFundMe page. "Help bring back the good times, send in your $1,000 today or risk losing the club for good."
"Let's Make Vermont Great Again," wrote another.
"Please bring this back to life so we can convert our trial to a full membership," added another.
In the email, Coffin wrote that he had not been consulted when committee leaders "decided to engineer and support" the Chapter 7 filing. In a declaration to be filed in court with the email, he said he had not received any business plan for liquidation and did not support that path. He is owed $1,946,000 for membership investments, according to a bankruptcy petition for Chapter 11 bankruptcy.
Club member John Pavia, who provided Coffin's email and declaration, called Barnes' plan for reorganization "comprehensive."
"It doesn't seek additional funding from members," Pavia told the Reformer. "It has a governance structure that puts control of the club in the hands of an independent body."
Barnes said a cornerstone of the plan is to merge with a publicly traded shell company. Before, he said, people shied away from becoming members because it was a closed or private company and they had no control.
Barnes also proposes to have a board of eight directors including members who represent different classes of creditors. Two "independent outside" directors might have specific insight into things such as food and beverage or resort ownership.
"The plan does not impair the membership in any way," said Barnes, who will need court and creditor approval. "Each class votes. Two-thirds of the money has to be in favor with a minimum of 50 percent of the voters."
Barnes said the 525 club members, who have individually spent from $20,000 to $85,000 to join, will not be asked to do anything different except pay their annual $15,000 dues.
Creditors with liens or judgments would be paid 100 percent of what they are owed at 6 percent interest over five years, according to the plan. They also would get shares in the company.
If the plan moves forward, a creditors committee will be formed. Barnes said an attorney and financial advisor will be hired using funds from a debtor-in-possession loan.
"So their job is to review our plan, make a comment on it, test the viability of the financial model then communicate to the broader good and we hope they would say, 'We support this plan,'" he said, adding that he believes it "supports a quick reopening and treats everyone fairly."
With this plan, Barnes said, "nobody gets hurt unlike some of these liquidation plans I've seen, and I've seen a lot of them. They don't treat people well and that's not what we're about."
Barnes said a new assessment puts the valuation of Hermitage properties at $55 to $65 million, whereas before it was $140 million — a number that seemed "lofty" to some. Altogether, assets would be worth about $85 million, he added.
The restructuring proposal does not include the Horizon Inn, Nordic Hill Lodge or Doveberry Inn.
"We would be planning to divest in those," said Barnes.
He anticipates the company would make about $22.6 million over 10 years — selling about 30 new memberships in the second year of reopening, 50 in the following and 600 over the decade. Membership prices will remain at $65,000.
The plan is "designed to be profitable," said Barnes. "This is after we pay back everyone on restructured claims. So after paying the electricians and plumbers and carpenters, we'll still be able to put money into our account to build a cushion and continually reinvest in the club."
Berkshire Bank supports the Chapter 7 filing. The bank "has paid enormous carrying costs for the last 15 months to maintain and preserve Berkshire Bank collateral in a mothball state since the filing of the state court foreclosure ..." Elizabeth Glynn, attorney for the bank, wrote in a filing in United States Bankruptcy Court for the District of Vermont. The bank "has paid several million dollars for certain of the expenses directly, such as the real estate taxes to the towns of Wilmington and Dover, sewer and water bond assessments to Coldbrook Fire District, forced placed insurance, the annual lease payments to the town of Wilmington for the leased ski trail area, electric utilities, and indirectly, by funding the receiver's state court-approved budget."
"The collateral needs to get sold and the resort reopened as quickly as possible to preserve value," Glynn wrote. "The court should grant the involuntary petition, appoint a Chapter 7 trustee, and the parties can either negotiate a sale of the estate's assets ... expeditiously or failing that, return the foreclosure to state court by abandonment or lifting the stay to be completed. A Chapter 11 is not feasible. There is no going concern value for the mothballed resort and Berkshire Bank will not consent to the [debtor-in-possession] financing."
Reach staff writer Chris Mays at email@example.com, at @CMaysBR on Twitter and 802-254-2311, ext. 273.
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