Yellowstone Club Sold to CrossHarbor Capital

Eight months after it tumbled into bankruptcy, the posh Yellowstone Club has a new owner, and a new lease on life. By Jonathan Weber , 7-17-09 Sam Byrne, principal at CrossHabor Capital Partners and the new owner of the Yellowstone Club. The sale of the Yellowstone Club to Boston-based CrossHarbor Capital Partners was formally completed Friday, ending the main chapter of an extraordinarily tumultuous bankruptcy proceeding and paving the way for the revitalization of the luxurious private ski resort. CrossHarbor, led by real estate investor Sam Byrne, paid $115 million for the 13,600 acre club near Big Sky, Montana, and has committed additional money to fund operations and assure payment of trade creditors. CrossHarbor will operate the club in partnership with Discovery Land Co., and plans to invest in additional ski terrain and re-orient future real estate development away from the steep hillsides and toward the base area. The high-end resort real estate market is moribund, and it’s not clear how quickly the sale of multi-million-dollar lots and condos and $300,000 memberships might resume. But the sale assures that the club will remain open and employees will keep their jobs, and the many tradesmen in Bozeman and Big Sky will receive the money that they are owed and have at least the hope of future work at the club. “I am very happy that the Yellowstone Club has today successfully emerged from bankruptcy as a well capitalized enterprise that will have a bright future for its members, employees and the community,” Byrne said. “This reorganization is not only a great result for the club, but also for the local vendors and trades people in the greater Big Sky community who will, after a long wait, be paid the monies due to them.” Tom Beckett, lead attorney for the club’s creditors, said hundreds of trade claims had already been approved for payment by the key parties, and money would likely be forthcoming within the next few weeks. The Yellowstone Club, founded just ten years ago, features extraordinary private skiing, a championship golf course, and an exceptional natural setting in the high mountains north of Yellowstone National Park. But the club was forced to file for bankruptcy protection last November in the wake of the divorce of club founder Tim Blixseth, the collapse of the real estate market, and years of reckless spending. Blixseth engineered a $375 million loan from a Credit Suisse-led lender group in 2005, and he and his then-wife Edra spent much of the money on personal luxuries, and on exotic vacation properties around the world that were supposed to be part of the ill-fated Yellowstone Club World. Byrne, who had invested heavily in a condo project and other property at the club, had tried to buy the club from Blixseth in early 2008 for more than $400 million, but that deal fell apart. In the bankruptcy proceedings, Credit Suisse and Blixseth attempted to blame the mess on a supposed plot by Byrne and Edra Blixseth to get the club on the cheap. Those arguments ultimately went nowhere, but not before they precipitated a bankruptcy court battle that Judge Ralph B. Kirscher, in a ruling this week, said was “of a magnitude never seen before in this court.” The court fight was settled in June after a scathing ruling from Judge Kirscher stripped the Credit Suisse lender group of its priority claims. Kirscher ruled that the bank had acted with “naked greed” in making a loan that was based on bogus appraisals and was far too large for the business to support. Blixseth was also accused of breaching his fiduciary duties to the club, and a trial on those charges will resume in bankruptcy court in the fall. Blixseth has appealed the ruling approving the bankruptcy reorganization plan and the accompanying sale to CrossHarbor. But Judge Kirscher earlier this week refused to stay the sale pending the appeal, stating the the appeal was very unlikely to succeed. Meanwhile, Edra Blixseth is herself in personal bankruptcy, and that case has been very tumultuous as well, with Tim Blixseth and some creditors alleging a range of misconduct by Edra. She received ownership of the club last August as part of the couple’s divorce settlement, and Tim Blixseth has aimed to cast the club’s bankruptcy as her fault. But the evidence suggests that bankruptcy was all but inevitable by the time she took control. Credit Suisse, Edra and others may yet attempt to recover assets from Tim Blixseth, notably properties in Mexico and Turks and Caicos that were acquired at least in part with proceeds from the Credit Suisse loans. Those deals were not in violation of the loan agreements, but the assets could nonetheless be subject to clawback in the wake of the bankruptcy. The club currently has 320 members - a few of them celebrities, including Bill Gates. But the bulk of the members are low-profile rich folks and they were generally supportive of the CrossHarbor deal. A number of club members have co-invested in the club with CrossHarbor, as has Discovery Land Co., operator of more than a dozen high-end private clubs around the world.