His Gillett Holdings Inc. will emerge from Chapter 11 bankruptcy September 30, but he surrenders all financial control of a broadcasting and cattle empire whose crown jewels are Vail and Beaver Creek. Once sole shareholder of GHI, Gillett will remain as its board chairman under a reorganization plan approved August 3 in U.S. Bankruptcy Court in Denver.
The 18 months of intense financial negotiations took a personal toll on Gillett. Choking back tears, he thanked an overflow crowd of attorneys and creditors in the courtroom for their patience and hard work in settling the bankruptcy case.
“I’m astoundingly appreciative of our creditors and employees.” he said. “I have caused them a lot of work.”
There were even bouquets from the judge. “My congratulations to the debtor,” Judge Sidney Brooks said, “for amassing that kind of consensual support,” referring to the 97 percent approval of the creditors, whereas only two-thirds are required to meet confirmation criteria.
Among the creditors was New York financier, Carl Icahn, recalcitrant participant in the negotiation process, who did not gain a stake in the reorganized company, but who did receive a more profitable cash settlement.
Just 10 days after the GHI bankruptcy, Gillett had to file for personal bankruptcy under Chapter 7 of the Code. This will mean selling nearly all personal assets, presumably including his house and classic car collection, to pay old debts of more than $10 million. Under Chapter 11 his future earnings would have been jeopardized. An executive of Apollo Group said Gillett’s personal bankruptcy has no effect on GHI or Vail Associates.
Under the confirmed plan, Apollo Advisors of New York City will take a 60 percent stake in GHI and will manage it under a recently formed affiliate, Apollo Ski Partners Ltd. Four principals in the Apollo group will join Gillett on a board that will govern GHI and the ski resorts.
Three of the Apollo group — Leon Black, Antony Ressler and Marc Rowan — are former employees of Drexel Burnham Lambert, the defunct Wall Street firm that made high-yield, high-risk junk bonds part of mainstream investing last decade. Black, as head of Drexel’s merger and acquisition department, worked directly for Michael Milken. The fourth board member is Craig Cogut, who served as legal advisor and consultant to Drexel. All four currently reside in the New York metropolitan area.
The four Apollo members are also principals in Lion Advisors, which is an investment advisor and representative to the worldwide French investment firm of Altus Finance. While Altus has investments in Apollo, it does not have direct control of either GHI or the Vail ski areas. Foreign ownership of the resorts was never an issue in the approval of the Forest Service operating permits needed for the coming ski season.
Drexel’s reputation for quick turnaround deals has preceded Apollo officials into town, and members of the Vail community remain wary of Apollo’s intentions. Town officials, who retained a law firm to follow the GHI bankruptcy proceedings, will now keep the firm on a retainer to advise them on the dealings of the Apollo executives.
Gillett, however, dismisses these concerns. “Apollo not only loves the mountains as we do, but also has the substantial financial wherewithal to enable us to support our capital improvement program as well as future expansion and development,” Gillett said. “We are convinced that our best and most exciting years lie ahead,” he added.
Apollo’s Cogut echoed these sentiments, pointing out that the reorganization plan requires a capital funding program that must, over a five-year span, average out to an annual $8.5 million. Cogut also said he is looking to buy a second home in Vail.
Effective date of the reorganization plan is September 30, which allows for its myriad details to be implemented, including FCC approval because of the television station holdings in GHI.
Under the plan, company debt will be reduced by $650 million. (GHI filed on $1.3 billion in debt on June 25, 1991.) Creditors will share in $134 million in GHI stock, $180 million in cash and $342 million in two new senior GHI debt issues.
Upon the effective date of the reorganization, 2.5 million shares of GHI stock begin public trading on a national secondary market. No initial public offering will be necessary as all stock will be issued to creditors. Another 7.5 million shares will also be issued, but restricted from public trading for at least one year.
Gillett, as part of the agreement, is eligible to buy up to 10 percent on GHI stock through a series of performance-based criteria in his employment agreement.
Estimated total administrative costs in the GHI bankruptcy cases are placed at $22 million, of which Vail and Beaver Creek will pay half.
No matter the price, Gillett is pleased to stay close to his heart of hearts of holdings: the Vail ski resorts. While some bankruptcies are used to skirt manageable debt, Gillett feels GHI’s Chapter 11 filing allowed a still viable but debt-burdened company to be born again.
At the conclusion of the Denver hearing, Gillett summed up to the court, “The bankruptcy process in this case appeared to work.”
Summary
- U.S. Bankruptcy Court will release Gillett Holdings, including Vail Associates, from bankruptcy.
- Apollo Group, headed by Leon Black, takes control.
- Gillett remains chairman at $1.5 million salary, retains no stock, but will be eligible to buy up to 10 percent.
- Gillett files for personal bankruptcy under Chapter 7.
- Andy Daly named president of Vail Assoc.; Kent Myers to head Beaver Creek.
VAI Salaries and Bonuses
One by-product of court hearings is the revealing of informaion not normally available. Some of this, especially the titillating details of VAI executive salaries, has made waves in the community and among rank-and-file in the company — especialy since documents show that increases are anticipated “to retain their loyalty and service for the reorganized company.”
Existing salaries show Andy Daly, executive vp, at $190,000; Jerry Flynn, vp/cfo, at $120,000; Kent Myers, vp/marketing, at $110,000. Accrued bonuses from previous years were, respectively, $870,400, $510,720 and $510,720. The eye-popping accrued bonuses owed to former VAI executives, Mike Shannon and Larry Lichliter, were $2.8 million and $2.2 million, respectively. —David Rowan
