Moonlight Basin has reached a settlement agreement with Lehman Brothers, which if approved by the bankruptcy court in September, would result in the resort being sold to its largest creditor.
The agreement was announced in a press release Saturday and is the result of nearly two years of negotiations between Lehman Brothers and Moonlight.
As a result of the agreement, the majority of Moonlights creditors will be paid in full, including several local contractors and vendors, said Russ McElyea, Moonlight’s chief operating officer.
“I wouldn’t say this one (settlement agreement) is perfect, but I would say it’s very good,” McElyea said.
Moonlight filed for Chapter 11 bankruptcy back in November 2009 in large part to gain protection from Lehman Brothers, which was trying to foreclose on the resort. At the time Moonlight owed Lehman Brothers about $170 million.
Later in 2009, Moonlight was granted a $24 million bridge loan from Lehman Brothers as part of the bankruptcy proceedings to keep the resort operating and provide capital to allow Moonlight’s court case against Lehman Brothers to proceed.
As part of the bankruptcy process, the resort also worked on a restructuring plan.
During the restructuring process, Moonlight made cuts in staff and slowly began pulling out of their main office in Ennis. Currently, the office in Ennis in home to about six employees, McElyea said. Most of them work out of Big Sky as well.
“The Ennis office is something I would like to close down and I’ve got a proposal on the table with Lehman to do that,” he said.
It makes more sense for the resort to have their Ennis folks work fulltime at the offices in Big Sky. Plus, the office building in Ennis is simply too large for a six-person staff, McElyea said.
The settlement agreement has three phases to go through before it’s final. First, the bankruptcy court must approve a disclosure statement, which essentially states the plan reached in the settlement agreement, he said.
If the disclosure statement is approved, a Sept. 7 hearing is scheduled to confirm the bankruptcy plan and settlement agreement, which go hand in hand, McElyea said.
If everything is approved, the sale of Moonlight should be complete by early November, he said.
The way the settlement agreement is structured the secured creditors will be paid in full, as will the vast majority of the unsecured creditors, McElyea said.
The primary secured creditor is Lehman Brothers, which Moonlight owes about $100 million.
“They’re really in the pole position,” he said.
Other secured creditors include contractors, which were actually paid back in January 2010.
The unsecured creditors are businesses like vendors and distributors, most of which are owed less than $10,000, McElyea said. The settlement agreement will pay off the approximately 200 unsecured creditors that are owed $10,000 or less. The agreement will also come close to paying off about 20 creditors that are owed just a bit more than $10,000.
“It was important from the Moonlight side that we figure out a way to get those guys paid,” he said.
From an operational standpoint there should be little change at the resort, McElyea said.
“I don’t think there’s going to be any changes of any significance anywhere in the organization,” he said.
However, as part of the agreement previous owner Lee Poole, who was part of the group that founded and built the resort, will not be part of the resort operations moving forward, McElyea said.
Working through the bankruptcy process has been difficult for everyone and he’s grateful the end’s in sight.
“I think having the bankruptcy behind us is very positive and it’s going to put us into a better operational position than we were in previously,” he said.
McElyea also credited folks on his Ennis staff for their hard work toward a settlement agreement and the operation of the resort during the process.
“It has been a very difficult situation to operate under,” he said. “The reason that (the resort) continued to operate is entirely contributable to the team that was here, people like Karen Lum, John Knapton and Kevin Germain … Things could have come unraveled. Those guys hung in there and they get all the credit.”
Lehman Brothers is also pleased with the settlement and the direction of the resort.
“We are delighted to have reached a settlement with Moonlight Basin and to move toward ensuring the long-term success of the Resort,” said Phil Cyburt, who oversees Lehman Brothers real estate management operations, in a statement about the agreement. “For more than three years, Lehman has focused resources to maintain the operations and integrity of the resort. Our commitment to the property has not wavered and remains aligned with supporting the local economy and community.”