Friday, May 15, 2009

Credit Suisse Asks Judge to Declare It Won Auction

Credit Suisse Group AG asked a judge to rule that it has won an auction for the Yellowstone Club, the bankrupt ski and golf resort near Yellowstone National Park.

U.S. Bankruptcy Judge Ralph Kirscher in Butte, Montana, began a court hearing today to decide whether Credit Suisse or Boston private equity fund CrossHarbor Capital Partners LLC made the “highest and best” bid for the club, said a person involved in the case. The person declined to be named because he has not been authorized to speak about the case by his employer.

Kirscher made it more difficult for Credit Suisse to win the bidding when he ruled May 13 that the bank had arranged a “predatory” loan to Yellowstone of $375 million that would be unlikely to be repaid. He then lowered Credit Suisse’s payback priority below other creditors, including CrossHarbor, and ordered the bank to include at least $43 million in cash in any bid for Yellowstone.

The founders of the club, Tim and Edra Blixseth, took $209 million of the Credit Suisse loan for personal use, according to court records. Edra Blixseth won control of the club when the couple divorced, court records show.

Credit Suisse is offering to pay creditors at least $43 million in cash and to retire the debt left on the loan, while CrossHarbor Capital has offered creditors $30 million in cash plus a $70 million note, and has agreed to spend as much as $75 million on Yellowstone itself.

Defaulted Loans

Bruce Corwin, a Credit Suisse spokesman in New York, declined to comment.

The Credit Suisse-arranged loan is one of at least eight such loans that the bank made to real estate developments mostly in the western U.S. Kirscher questioned all of the loans that Credit Suisse made to similar developments, including Tamarack Resort in Idaho, Promontory in Utah and Lake Las Vegas, a 3,592- acre (1,454-hectare) golf community in Nevada.

All filed for bankruptcy or went into default, along with Turtle Bay Resort, a beach development in Hawaii. Promontory exited bankruptcy last month.

Yellowstone Club filed for bankruptcy in November, three months after Edra Blixseth took control of it.

The case is In re Yellowstone Mountain Club LLC, 08-61570, U.S. Bankruptcy Court, District of Montana (Butte).