A federal bankruptcy judge on Tuesday rejected a $2 million loan to prop up Tamarack Resort while it finds a buyer, a blow to hopes of reopening the failed Idaho vacation getaway for skiing this year.
Jean-Pierre Boespflug, the French-born majority owner of the resort, said he's working with his lawyer to craft a new proposal, possibly within a week.
U.S. Bankruptcy Court Judge Terry Myers said the Credit Suisse Group-led proposal didn't meet federal law, was likely to default and had the potential to further hurt those already owed millions by Tamarack after its 2008 collapsed.
Bankers from Zurich-based Credit Suisse were leading investors who offered the money to hire a chief restructuring officer, pay a tardy $250,000 state land lease to Idaho and complete Tamarack's sale.
Meanwhile, homeowners at Tamarack were counting on the loan coming through to ease their separate efforts to open the resort for skiing Dec. 20.
But Myers wrote his decision was based on whether Tamarack provided adequate assurances that the interests of other creditors were protected even if Tamarack's sale fell through _ not on speculation about how the loan might help the resort open or how the cash infusion might ease its sale.
"This is not about the desirability of a ski season at Tamarack in 2010. Nor is it about what ultimate result (reorganization, sale, or other) would best serve the area or its residents," Myers wrote in his order. "At bottom, it is a question of whether this specific financial and management proposal, made by Tamarack and supported by Credit Suisse, meets the standards that federal law imposes. It does not."
Boespflug said the judge's ruling was a disappointment but he was hoping a new loan agreement would satisfy the lender, creditors and Myers.
"There are ways of creating the compromise that the court would like to see," Boespflug said.
Under the original terms demanded by Credit Suisse and Cleveland-based Candlewood Partners, another investor offering the loan, Boespflug and co-owner Alfredo Miguel were required to step down from management once the money came through.
That's because they'd lost the confidence of some investors, who wanted a new, chief restructuring officer to step in and oversee a potential sale.
Boespflug insisted he had three letters of intent from potential buyers for the real-estate project located 90 miles north of Boise. It became mired in more than $300 million in debt as it went on a building spree just as the market for its properties collapsed starting in 2007.
In court last week, Boespflug and other loan supporters _ including a real-estate agent who has been marketing the property for $68 million _ said the new money would help keep Tamarack's assets including its unfinished Village Plaza and ski lifts intact and fetch a price that "could be five to six times its liquidation value."
Even so, Myers decided the likelihood of completing a sale before the loan had to be repaid in six months was slim.
The likelihood of a default was high, he wrote, a circumstance that would leave creditors including construction companies, banks like Wells Fargo and even the local sewer district in worse shape than they are now as they seek to recover their money.
"The milestones are all weighty and on short fuses," Myers wrote in his 41-page decision. "Credit Suisse's control over the sale and plan process, and the short milestone deadlines, especially given the balance of the evidence as to the complexity of sale and the lack of commitment of Credit Suisse to discount or credit bid, make the risk of default high, and concomitantly reduce the adequacy of the alleged protection."