Competing bidders ended up banding together Monday to negotiate a deal to jointly buy Sea Island Co. for $212.4 million at an auction intended to settle the Georgia luxury resort operator's bankruptcy case.
If a federal bankruptcy judge approves the sale, Sea Island's new owners will be a four-way partnership. They ultimately agreed to pay nearly $15 million more than the company's resorts, golf courses and private clubs would have fetched without going on the auction block.
Sea Island chairman and CEO Bill Jones III, who was forced to sell the company after three generations of family ownership, said he was "very pleased" with the auction's outcome. Under the sale terms, he would remain Sea Island's chief executive.
"Together the bidders proposed a comprehensive plan that ultimately was higher than either bidder had bid alone," Jones said in a statement.
The auction Monday at the Atlanta offices of Sea Island's lawyers required eight hours of negotiating before the bidders reached a deal. Reporters were not allowed to attend and details of the outcome came from a Sea Island spokesman.
The new owners would be a partnership among investment firms Oaktree Capital Management of Los Angeles and Avenue Capital Group of New York, which would have paid $197.5 million for Sea Island had competitors not forced an auction, and partners Starwood Capital Group of Greenwich, Conn., and the Anschutz Corporation of Denver.
"We understand how important Sea Island is to the community and to its various stakeholders," Oaktree president Bruce Karsh said in a statement. "We are confident that financially strong and well-capitalized owners will establish a new beginning at Sea Island."
With four luxury resorts, three golf courses and two private clubs located 80 miles south of Savannah, Sea Island has been a secluded getaway for wealthy travelers since 1928.
But Sea Island Co. was saddled with more than $700 million in debt when it filed for Chapter 11 protection Aug. 10.
The company says costly upgrades and renovations aimed at attracting wealthier customers, followed by a recession-driven toll on its resort and real-estate businesses, led to its insolvency.
The sale won't be final unless Sea Island's plan to emerge from Chapter 11 is approved by a judge, who has scheduled a Nov. 4 hearing. Sea Island's creditors must first vote on whether to accept the deal by Oct. 29.
The deal would require the new owners to keep Sea Island's resorts and golf courses open, honoring existing club memberships and retaining the company's 1,400 employees, including Jones as CEO.
Under the company's plan, lenders including Synovus Bank, Bank of America and Bank of Scotland would recoup about a third of more than $600 million in outstanding loans to Sea Island. The banks are already on board with Sea Island's plan.
New provisions negotiated as part of the sale, including an agreement to pay $1.7 million in deferred compensation owed to former Sea Island employees, will help win support from unsecured creditors, said Jordi Gusso, attorney for the unsecured creditors committee.
"Subject to the court's approval and filing of the membership supplement to include the improvements negotiated today, the committee will issue a letter to creditors urging support of the plan," Gusso said.
Under the previous arrangement with Oaktree-Avenue, unsecured creditors _ including former Sea Island president Dennie McCrary, who is owed about $27 million _ would have been paid shares from a pool totaling about $3 million. The company estimated those creditors would have received about 3 cents per dollar owed to them.