Ultimate Escapes files bankruptcy; lender agrees to make credit bid

By Caroline Salls

Pittsburgh, Sept. 20 - Ultimate Escapes, Inc. filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware at the recommendation of a special committee of the company's independent directors, according to a company news release.

Ultimate Escapes said the special committee recommended the filing in order to protect the company's assets with a goal of maximizing value for creditors, members and potentially for shareholders.

As previously reported, the company and its largest secured lender are exploring the sale of Ultimate Escapes' operations to another destination club, hospitality company or investment group, as well as other strategic alternatives.

Among the options the company has explored is the possibility of a standalone plan under which members could acquire equity in the club.

Credit bid agreement

According to the release, Ultimate Escapes' largest secured lender has agreed to provide a credit bid for substantially all of the company's assets in order to facilitate the sale of its assets and operations.

Under a proposed bidding process, the lender's bid would be subject to higher and better offers through an auction process.

If no competing bids are received, the lender or its assignee will purchase the company's assets.

No other details of the lender's bid had been filed as of Monday evening.

In addition, Ultimate Escapes is seeking court approval to appoint CRG Partners, LLC to provide chief restructuring officer services and supporting personnel.

Cash needs

In a presentation to members filed with the Securities and Exchange Commission on Sept. 10, Ultimate Escapes has little cash and is operating under a forbearance agreement with primary secured lender Capital Source resulting from a loan agreement default.

The company said CapitalSource was providing very limited funding and giving the club limited time to restructure and recapitalize its business, either on a standalone basis or as part of a merger or sale.

Since no plan had materialized, the company said it was increasingly likely that its restructuring would be completed in bankruptcy.

Member option

The company also presented the option under which Ultimate Escapes would be converted to a club owned and controlled by its members.

The company said in the presentation that it planned to poll members to find out the level of interest in a member-controlled club.

Ultimate Escapes said members would be required to pay a one-time assessment in the form of an equity club conversion fee under the member-owned option, with fees specified for $15 million and $30 million targets.

The club said participating members would convert their equity club conversion fee and existing RAP amounts into common stock of Ultimate Escapes, Inc., substantially improving the company's balance sheet by converting roughly $80 million of member RAP amounts.

Under this option, the members would also assume a modified loan agreement with CapitalSource that would cure existing loan defaults and allow the member-owned club to operate on a standalone, cash flow positive basis.

Debt details

According to court documents, Ultimate Escapes has $10 million to $50 million in assets and $100 million to $500 million in debt.

The company did not list any unsecured creditors with claims of $1 million or more.

Ultimate Resorts Holdings, LLC is the company's largest shareholder, with a 43.45% interest.

The company is represented by Greenberg Traurig LLP.

Ultimate Escapes is Kissimmee, Fla.-based destination club operator. The Chapter 11 case number is 10-12915.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.