Diamond Resorts Set As Stalking Horse Bidder For ILX Resorts

LAS VEGAS, NV (June 18, 2010) — According to court documents filed this month, ILX Resorts’ January 2010 joint plan of reorganization with its largest creditor, Textron Financial Corporation, has been approved. That means Las Vegas-based Diamond Resorts Corporation, via ILX Acquisitions Inc., is officially the “Proposed Purchaser” of the assets of ILX Resorts.

A hearing to set a date for the sale of those assets will take place on July 23, 2010, and unless another bidder comes forward at the last minute with a successful bid, Diamond, as the *”stalking horse” bidder, will become the new owner of ILX.

Pursuant to the agreement, Diamond has offered to purchase the assets for $29,672,251, which is composed of $5,856,913 in cash and the assumption of the Debtors’ obligations under the Textron Loans.

The assets being sold include the following: all of the Debtors’ rights under all executory contracts related to the Business and unexpired leases to be assumed and assigned, including all Property Management Agreements; all Accounts, including, among other things, all Timeshare Loans; all unsold Timeshare Interests; certain real property and furniture, fixtures, and equipment; all of Debtors’ rights as declarant, developer, or seller under the Membership Plan and any other Resort-related, Timeshare Property-related, Club-related, or other Real-Property related document or instrument; and certain general intangibles set forth in the Asset Purchase Agreement.

Assets related to the Debtors’ business operations that will be excluded from the sale include, but are not limited to: (a) merchant deposits; (b) income tax refunds; (c) certain real property; (d) certain equipment leases; (e) Timeshare Loans and holdbacks owned by Resort Funding, LLC; (f) certain notes receivable claimed as collateral by M&I Bank; (g) all cash and cash equivalents; (h) utility and other deposits made by Debtors; (i) certain documents and corporate and other records; and (j) equity interests of the Debtors and their subsidiaries.

Liabilities that will be assumed by Diamond, assuming it has the winning bid, include approximately $23,800,000 of liabilities owing to Textron Financial Corporation in connection with the Textron Loans; liabilities with respect to loans made by M&I Bank to Sedona Vacation Club and Premier Vacation Club; all obligations of Debtors as declarant, developer, or seller under the Membership Plan and any other Resort-related; Timeshare Property-related or Club-related document or instrument; obligations to honor existing owner and guest reservations, bankings, and allocations of rooms and facilities; unpaid property taxes on the assets; liabilities accruing from and after the closing date with respect to contracts assumed or acquired as provided by Section 365 of the Bankruptcy Code; and the lease obligation with Indian Wells Partners for 91 Portal Lane in Sedona, Arizona and payments relating to that which accrue from and after the closing date.

It should be noted that Diamond is not mentioned by name in the court documents cited here, but ILX Acquisitions, Inc. is a Delaware Corporation registered on Jan. 12, 2010 for the purpose of purchasing those assets. The address for that corporation is DRI’s headquarters in Las Vegas, NV. and the contact name is DRI’s Chief Financial Officer, David Palmer. That is a solid indication that Diamond’s involvement, previously announced in an 8-K document filed with the SEC, is still on track.

Phoenix, AZ-based ILX filed for Chapter 11 bankruptcy (reorganization protection) in March, 2009, citing “Dramatic challenges in the economy and recent unanticipated reductions in our credit facilities caused by disruption and instability in the capital markets” as the cause. The filing involves the Phoenix company and certain of its subsidiaries and limited liability companies.

ILX has eight resorts in Arizona and one each in Indiana, Colorado and San Carlos, Mexico. Sites in Puerto Peñasco, Mexico and Sedona, AZ are in the final planning stages, and the company was actively selling at the Puerto Peñasco site prior to the bankruptcy filing although the resort there has not been built. Through its Premiere Vacation Club the company has also acquired inventory at the Carriage House in Las Vegas and Scottsdale Camelback Resort in Scottsdale, AZ.

Las Vegas, NV-based Diamond Resorts International is one of the largest vacation ownership companies in the world with more than 160 branded and affiliated resorts and over 24,000 guest beds in 26 countries with destinations throughout the continental United States and Hawaii, Canada, Mexico, the Caribbean, Europe, Asia, Australia and Africa.

• *A “stalking horse” bid is an initial bid on a bankrupt company’s assets from an interested buyer chosen by the bankrupt company. From a pool of bidders (in this case there is only Diamond so far), the bankrupt company chooses the stalking horse to make the first bid. This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company’s assets. In essence, the stalking horse sets the bar so that other bidders can’t low-ball the purchase price.

Copyright JAM Publishing 2010

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