Utah’s Premier Resorts bankruptcy still unresolved
May 22, 2009
Premier Resorts of Utah has more time to defend its solvency for the federal bankruptcy court in Salt Lake City.
Judge Judith A. Boulden at a hearing on May 19 postponed decisions on many requests from debtor Deer Valley Lodging, owned by Premier Resorts of Utah, and creditors including Mark Lampe, president of the home owner’s association at The Lodges at Deer Valley, who initiated the involuntary bankruptcy process on April 27.
Premier Resorts of Utah was required to submit documents defending itself against Chapter 7 bankruptcy demanded by a few dozen creditors by that date. All parties involved agreed to extend that deadline to 5 p.m. on May 22.
The extension also granted more time for negotiations that could possibly have led to a resolution of disagreements.
The case involves a dizzying array of players including over one dozen attorneys from nine different law offices. The creditors include 9 home-owner associations, about 35 individuals and at least two companies.
The May 19 hearing revolved around two requests. The first were from the home and condominium owners for a "lifting of the stay" imposed on creditors in the event of an involuntary bankruptcy request. The stay allows the debtor to continue operating as normal, but prohibits creditors from taking further action to recover their money.
Recommended Stories For You
The second request was from Premier Resorts International to delay the appointment of a trustee who could potentially take over the Utah company’s finances.
Judge Boulden ordered the May 19 hearing to be "preliminary" and postponed decisions until May 28 effectively leaving the stay on home owners in place and granting Premier Resorts more time.
Park City attorney Joe Tesch who filed the initial petition in April said he agreed to the extension, but the stay is hurting the victimized home owners further because they can’t end their contracts with Premier Resorts and find new property managers.
A source familiar with the court speaking on background said the law is that way to deter creditors from forcing a debtor into bankruptcy.
Premier Resorts International spokesman Bobby Foster said his company empathizes with owners regarding this issue. A letter signed by Premier Resorts International president Barbara Zimonja and sent on May 19 recognized that the company had received several requests to terminate contracts, but could not because of the stay. Instead, the company had stopped accepting reservations for units whose owners made that request.
The letter is becoming one of the more hotly debated aspects of the proceedings. It requires a few stipulations in return for being exempted from the stay.
"They’re basically saying they would not sue us for fraud and other miscellaneous things, but are still in line for all the monies due. There would be no changes in what they’re owed," Foster said.
But Tesch disputes that. The letter never guarantees payment, he said. It only asserts the signer’s right to make a claim on money owed.
For example, the first stipulation begins as follows: "Except for claims against the other party for amounts owed under the terms of the Rental Agreement prior to the Effective Date which Reserved Claims are specifically reserved and not released hereby ."
According to Tesch, that language offers no protection to owners at all. In his view, the company is asking owners to relinquish their rights to future legal action in exchange for a relief from the stay. That’s not a good deal for his clients, he said.
"That letter was not negotiated and I don’t expect it to be accepted," Tesch said in an interview Thursday. "This is a very convoluted and difficult document to understand, and apparently, intentionally so."
Joe Wrona, who represents a few dozen of the creditors, was equally skeptical of the proposal.
"I don’t see how Premier Resorts believes it is in a position to dictate to unit owners at this point in time," he said.
Court documents suggest Trail’s End Lodge at Deer Valley accepted some kind of deal. Judge Boulden approved an agreement between Premier Resorts and Trail’s End that released it from the stay and its contract with Premier Resorts.
Foster said he didn’t know if the lodge accepted the terms of the May 19 letter or negotiated different terms.
Many of the court documents are accusations and answers to accusations.
Premier Resorts chief financial officer Brad Goulding told the court that his company is continuing to meet contractual obligations during the stay.
"(Premier Resorts of Utah) has instructed its staff to cease taking all reservation advance deposits," he wrote.
The Lodges at Deer Valley and the Silver Baron Lodge home-owner associations claimed the company had failed to timely account to owners, had admittedly converted owner’s rental income to its own purposes and finally, had terminated staff and employees necessary to manage and operate the lodge.
Goulding refuted all three claims.
It appears that the second two originated from statements Foster made during interviews with KPCW. On May 12, he said they were operating on a "skeleton crew."
On Thursday, Foster said that was accurate, but also normal for this time of year. Goulding and Foster have both asserted that front desk services, basic housekeeping, security and on-site management are still performed.
Regarding the conversion of owner’s rental income for the company’s own purposes, Foster told KPCW in that same interview that setting up management at developments like The Chateaux and The Village at Empire Pass required initial investment that is paid back over a long time.
"You have to carry those for quite a while," he told them.
But on Thursday Foster argued that that statement was not in response to "where the money went." He asserted that property management companies operate on a thin profit margin of only 2.5 to 3 percent and that lines of credit are required to pay employees year-round. A bad year for travel combined with frozen credit caused the company to run out of cash.
But as marketing director, Foster said he was unable to speak in any more detail about the financial procedures the company followed.
On May 19, Premier Resorts of Utah also objected to the request for a lifting of the stay on certain properties, particularly The Lodges at Deer Valley and Silver Baron Lodge. Court documents accused the home owner associations of not paying $30,000 in management fees.
Foster explained that unlike owner’s rental profits which are subtracted from gross rental revenue, home owner associations are supposed to reimburse the property managers for a large percentage of on-site staff wages as well as supply purchases. The associations and the owners have separate and dissimilar contracts and The Lodges and Silver Baron are in violation of those contracts.
"We kept all those services going, but payment stopped," Foster said.