However, the company that operates the two ski areas, Vail Associates, lost two top executives and will come under new ownership if a proposed court plan receives creditor approval.
Gillett Holdings Inc. of Denver, parent company of Vail Associates, filed for Chapter 11 bankruptcy protection on June 25, 1991 on $1.3 billion in debt. GHI businesses include meatpacking, broadcasting, and the ski resorts, which chairman, George Gillett Jr., bought in 1985.
Capital funding for VA, which ranges from $6 to $12 million annually, has not been affected so far by the parent company bankruptcy.
Gillett himself stepped in as president of the ski company in late February when its president Mike Shannon and executive vice president Larry Lichliter resigned. Their surprising resignations came the same day as a creditors’ motion that could create a lengthy delay in the bankruptcy settlement.
Both Shannon and Lichliter denied any connection between their resignations and the court filing, saying instead they had decided to form a resort investment company, KSL Enterprises, with Kohlberg Kravis Roberts & Co. of New York City.
A rumored buyout of the ski resorts by the firm’s Henry Kravis, a part-time Vail resident, were denied recently by both Shannon and Lichliter.
Just prior to those developments and after months of legal wrangling, the case seemed headed for a relatively quick resolution. Negotiators in the case had reached an accord, though it was an unpalatable one for Gillett.
In early February, the GHI creditors’ committee approved a settlement proposal under which Gillett would surrender all but a five percent stake in his company in return for forgiveness of half the company’s $1.3 billion debt.
Consensus of the creditors is for Gillett to remain as manager of the ski resorts. Two key investor groups, Apollo Investment Fund L.P. of New York City and Altus Finance of France, would gain a 55 percent ownership stake in the reorganized company.
The plan, however, was quickly denounced by two groups of subordinated bondholders left with little tangible value in GHI. Both groups filed court motions known as “Rule 2004,” seeking more detail from Gillett officials on how the proposed settlement deal was reached.
One group, the Equitable Life Assurance Co., is said to be negotiating with Gillett officials to improve its stake in the reorganization plan. The other group is an ad hoc committee that includes Drexel Burnham Lambert Inc., Icahn Holding Corp., and T. Rowe Price Associates.
While this committee has enough voting power to easily veto the proposed reorganization plan, it may have to accept the plan nonetheless under what is called a “cram-down” provision. The provision allows case-judge Sidney Brooks of the federal bankruptcy court in Denver to accept the plan without further discussion from creditors in the case.
In mid-April, however, Brooks sided with creditors and called for additional information, including a first-time request for the sale value of GHI assets. Company officials have avoided public disclosure of the value of Vail Associates.
The court also requested for the first time the complete financial status of several other Gillett businesses not affiliated with GHI, including his Vail/Beaver Creek Jet Center, Vail Magazine and Gillett Cattle Co.
In the meantime, Vail Associates announced on April 30 that it “intends to voluntarily file for Chapter 11 bankruptcy protection in mid-May … as part of an effort to facilitate the reorganization of our parent company, Gillett Holdings, Inc., and to eliminate the guarantees of Vail and other GHI subsidiaries of GHI debt.”
Dissident creditors have questioned loans made to Gillett through GHI, and in particular a $10 million loan for Gillett’s cattle ranches in south central Oregon. The ranches are now on the market for $17 million.
Since February, GHI attorneys have filed two consecutive requests for case extensions to provide the background data sought by the two creditor groups. The latest extension allows GHI officials to complete their own reorganization plan by July. Failing that, creditors can then submit their own plan for court approval.
The plan currently proposed is largely the product of Apollo principal Leon Black, former mergers and acquisition manager for Drexel Burnham Lambert (DBL) who himself is being sued by DBL for return of the $16.6 million bonus received shortly before the company filed for bankruptcy in 1990.
Once the Rule 2004 motions are cleared, creditors have 60 days to vote on the plan following court release of the disclosure documents. Resolution of the bankruptcy will then await the approval of the two thirds of creditors in all 11 classes of Gillett debt, barring a cram-down ruling.
Assuming a best-case scenario in favor of the current plan, a settlement could come as early as July. Without such benevolence, observers say, it could yet drag on for another year or two.
Despite the ongoing drama of Vail Associates, both Vail and Beaver Creek ski operations enjoyed good seasons, with both resorts setting new records in skier visits.
