Update on Consolidated Resorts Bankruptcy Proceedings
LAS VEGAS, NV (May 7, 2010) — The Chapter 7 bankruptcy of Las Vegas-based Consolidated Resorts, Inc. is showing signs of winding down. Nearly a year of investigations, complicated negotiations and court proceedings have now left the sale of the major assets as nearly the last remaining order of business.
Of particular interest in the current state of affairs is an item in the March 16 motion to the Court, submitted by Trustee William A. Leonard Jr., stating:
In addition, and more importantly, with the Court’s approval of the Amended Stipulation, the parties will be working diligently on an expedited basis to finalize an asset purchase agreement based on the heavily negotiated Letter of Intent (“LOI”) entered into by and among the Trustee for the estates, GMAC and ASNY providing for ASNY’s purchase, subject to overbid by qualified third party bidders, of substantially all assets of these Debtor estates (except for various carefully defined excluded assets). …
In the meantime, the Trustee (and his professionals) and GMAC (and its professionals) continue down the path of a coordinated marketing of the estates’ assets. Discussions with multiple potential purchasers have continued unabated, including with ASNY, the most logical and probable buyer of the estates’ assets.
In other words, an agreement with ASNY Company LLC, which is Arthur Spector’s company, has been presented to the Court by the Trustee making ASNY a stalking horse bidder for substantially all of the Debtors’ assets.
The most recent motion by the Trustee, filed on April 30, 2010, affects Consolidated Realty, Inc.; Consolidated Resorts, Inc; Consolidated Maui, Inc; Consolidated Kona, Inc.; Soleil PS, LLC; and Soleil LV, LLC. It asks the Court to approve a stipulation relating to the coordinated marketing of certain estate assets in which Textron Financial Corporation holds interests; and the employment by the estates of certain brokers to assist with the marketing of the assets.
Specifically, the Trustee suggests using Sotheby’s to assist with the sale of the Kauai Sands Hotel, and Colliers to assist with the sale of property located in Palm Springs.
Textron is involved in that because Textron and the Trustee have been working together in an effort to stabilize the environment affecting both properties, so that sale opportunities and values could be maximized and Textron’s status as a secured creditor could be resolved. This program would expedite a disposition of those assets, in which Textron has a financial interest, and at the same time make the Estates a partner in the sale outcome by ensuring that the Estates will reap a direct, tangible economic benefit from any such sale(s).
Note that the assets involved in the combined bankruptcies of the 14 companies include extensive timeshare note portfolios consisting of notes payable by purchasers of timeshare interests in resorts developed and operated by various Debtors and their related entities. The bankruptcy estates do not include ownership of the timeshare resorts themselves. Other assets include remaining undeveloped and partially developed real property interests; recovered or otherwise unsold timeshare units; certain reserved rights of the Debtor estates as “developers” and as “declarants” of various timeshare resorts; and general intangible property rights, software, and related computer software equipment owned by various Debtors.
Still apparently unresolved are issues related to the Trustee’s right to sell the Customer Lists, the question being whether or not the Customer Lists are in fact Estate assets subject to sale by the Trustee.
The major secured creditors in the case are: GMAC Commercial Leasing; HSBC Bank; Textron Financial Corp.; and Liberty Bank.
Concord Servicing Corp. was selected to handle all servicing and some collection work — on both encumbered and unencumbered accounts– and substantial funds have been recovered during the period.
The next Court hearing will be held on May 14 at the Foley Federal Building in Las Vegas. The case is Consolidated Resorts, Inc., Case No. 09-22035 (LBR) Jointly Administered United States Bankruptcy Court, District of Nevada. The Hon. Linda B. Riegle presiding.
To recap: In June, 2007, Consolidated Resorts’ CEO Arthur Spector cut a deal with Goldman Sachs Group affiliate Whitehall Street Real Estate Funds. Under that deal Whitehall’s most recent fund, Whitehall Street Global Real Estate Limited Partnership 2007, made a substantial investment in the parent company of Consolidated, ASNY Holdings. The new venture was called ASNY Holdings, LLC.
Spector continued as the managing partner of the new joint venture and a substantial holder of the new company, while Whitehall held the purse strings to the tune of $327 million. ASNY maintained its principal offices in Las Vegas.
Unfortunately, by 2008 the recession had hit, the timeshare industry went south, and in early 2009 Goldman/Whitehall walked away from its investment, leaving ASNY holding the bag. As a result, Consolidated Resorts, Inc. filed for Chapter 7 bankruptcy in July 2009. Chapter 7 provides for liquidation of assets so that cash may be distributed among creditors. The company listed assets of $50 million to $100 million and liabilities of $100 million to $500 million.
As was true with other timeshare developers, the credit crunch made it difficult for Consolidated to obtain third-party financing for its operations. In addition, Consolidated and other developers were slammed as cash-strapped consumers stop paying on timeshare loans and used their money for their home and car payments.
Consolidated operated 13 resorts in Las Vegas, Hawaii and Orlando, Fla.: Tahiti, Tahiti Village and Club de Soleil in Las Vegas; Sands of Kahana Vacation Club, Kahana Beach Club, Hono Koa, The Gardens at West Maui, Kahana Villa Resort, Maui Beach Vacation Club, Maui Banyan Vacation Club, Kona Islander Inn and Imperial Hawaii in Hawaii; and Villas at Regal Palms in Florida.
The 14 related companies that filed for Chapter 11 are:
- Destinations Unlimited, LLC
- Consolidated Resorts Kona, Inc.
- Consolidated Realty, Inc.
- Lahaina Ticket Company, Inc.
- Consolidated Media, LLC
- Soleil PS, LLC
- CRI Travel Holdings, LLC
- Soleil LV, LLC
- Consolidated Resorts Travel, LLC
- Consolidated Resorts Tahiti, Inc.
- Consolidated Resorts, Inc.
- Consolidated Resorts Orlando, Inc.
- Consolidated Resorts Maui, Inc.
- Consolidated Tickets, LLC
Not affected by the bankruptcy are Consolidated Resorts Management (CRM) and Soleil Management (SM), which were formed in 2000 and which continue to manage the resort properties. CRM is a Hawaii corporation, registered in Nevada as a Foreign LLC. SM is a registered Nevada LLC. The headquarters for both are located in Las Vegas.
Inside The Gate will update this case again as soon as there is more of substance to report.
(UPDATE Sept. 2010: See final update here)
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