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Cash stops flowing at Yellowstone

The exclusive club's bankruptcy filing is hurting many small firms that serve it.

December 26, 2008|Bloomberg News

Builders, florists and blacksmiths are counting their losses along with financiers and hedge fund managers in the bankruptcy of the Yellowstone Club, a private ski and golf enclave in the Montana Rockies.

The club, where Persian rugs line the ski lodge and a trail is named Learjet Glades, sought protection from creditors Nov. 10, brought down by the founders' divorce, profligate spending and a real estate slump. Members such as investment banker Robert Greenhill, founder of Greenhill & Co., want to know where their $250,000 deposits went. A local wastewater company wants its $5,472.

Many small towns in the Rocky Mountain region rely on rich people who come to fish, ski and play golf. Now some destination spots are becoming desperation spots. Idaho's Tamarack Resort is being run by a court-appointed manager after defaulting on a $250-million loan in 2007. Creditors forced the Promontory in Utah into bankruptcy in March.

"It's a pretty big impact on all the people who got stiffed," said Todd King, owner of Advanced Wastewater Specialists, who hasn't been paid for treating effluent at the Yellowstone Club. With the recession, the timing couldn't be worse, he said. "We definitely don't want to work for free."

The pain is acute around Bozeman, Mont., about 45 miles north, where many of the club's workers live. The club employs 400 to 600 people, depending on the season, and has a monthly payroll of $882,000.

The Yellowstone Club remains open after getting court approval Dec. 12 for an emergency $19.8-million loan from CrossHarbor Capital Partners, a private equity firm run by club member Sam Byrne.

Almost all members, including Microsoft Corp. founder Bill Gates, built lavish houses at the site, creating work for local contractors. For years, cement trucks thundered up the narrow road to the club, and a parade of pickups lined up at the security gate each morning.

The list of 700 creditors filed in federal Bankruptcy Court reads like a Yellow Pages of Bozeman and the surrounding area. A florist is owed $17,285 and a blacksmith $1,095 for shoeing horses. Scenic City Portables, which provides toilets, is waiting for $12,430. Even Montana's utility company is out in the cold: NorthWestern Energy is owed $247,000.

Mary Warmoth's company, We Dust Control & Deicing Inc., sprayed dirt roads along the 18-hole golf course to control dust last summer. The club owes her $4,147.

"The thing that was the most shocking to us was that they knew they couldn't pay the bill when they asked us to do the work," Warmoth said. "One of the guys up there told our driver, 'Good luck getting paid.' "

Yellowstone Club spokesman Bill Keegan said the club was doing what it could to repay all the creditors.

When Tim Blixseth and his former wife Edra opened the club, they billed it as the most exclusive ski resort in the world. The Blixseths signed up ski film director Warren Miller to be director of skiing and brought in a former Secret Service agent to be director of privacy.

The rich piled in, paying as much as $10 million for plots of land. Property owners also had to put down $250,000 to $300,000 for a membership.

The trouble started well before the U.S. recession. Cyclist Greg LeMond, an early investor and homeowner, sued the club in 2006, saying the Blixseths had borrowed $375 million from Zurich, Switzerland-based Credit Suisse Group and took $209 million for themselves as a dividend, jilting him and other investors.

The parties settled the suit this year for $39.5 million.

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