Court denies Hermitage's request for financing
RUTLAND — At the latest hearing on the Hermitage Club's bankruptcy case, the company was denied court approval to borrow $1.75 million for reorganization, but will be permitted to present a new proposal.
"Dear Member-Creditors, the Hermitage Club was in court today seeking interim [debtor-in-possession] loan approval along with an insurance financing request, which Berkshire Bank and others continue to oppose," the companies that run the Hermitage wrote in an email Friday. "The judge did not grant the interim requests and instead has scheduled an evidentiary hearing for July 26 to hear arguments for a final funding resolution."
In an order issued Friday, Judge Colleen A. Brown noted that several parties objected to motions for the Hermitage to borrow the money from Restructured Opportunity Investors Inc. The parties are: Barnstormer Summit Lift LLC, which includes club members who invested in a chairlift at the Hermitage's private ski resort at Haystack Mountain; United States Trustee for Region 2 William K. Harrington, who is charged with enforcing civil bankruptcy laws and who raised concerns about the Hermitage's publication of a reorganization plan without getting court approval to do so; Reinhart Foodservice LLC, which is owed more than $1.5 million; the town of Wilmington and the Cold Brook Fire District, which both worried that the plan did not include payments taxes or municipal fees owed to them; the Ad Hoc Committee, which is
made up of club members interested in the outcome of the case; and Berkshire Bank, which foreclosed the ski resort, golf course and several inns last year and has called for a liquidation of assets. Brown described many of their arguments as "strong and practical."
The Hermitage "acknowledged the compelling nature of several of the arguments set forth in the objections, explained they were not prepared to present evidence at that hearing due to the content and strength of the objections, indicated they were renegotiating the terms of the (debtor-in-possession) loan in order to address some of the objections, and requested a continuance of the hearing until July 26," Brown wrote. "All parties in interest who had filed objections voiced opposition to a continuance. After considering the record in the case and the arguments presented, the court sustained the objections, denied the continuance and denied the debtors' request for approval of the (debtor-in-possession) interim financing proposal presently pending before the court."
Barnstormer Summit Lift LLC, Berkshire Bank, Cold Brook Fire District and Harrington also filed objections to motions from the Hermitage to assume an insurance premium finance agreement.
"The debtors acknowledged at the [Friday] hearing that they were not able to move forward with the insurance premium motions unless and until the court approved their DIP loan, and therefore requested the hearing on these motions be continued to July 26," Brown wrote.
In the email to members, the Hermitage said it "continues to maintain insurance on the assets while we seek the (debtor-in-possession) financing approval and we continue to seek commitments on the new capital raise."
The Hermitage said Berkshire Bank will likely file its updated appraisal of the companies' properties before the July 26 hearing.
"The club will be ready with our updated appraisal which we believe has sufficient equity cushion required for a priming," the companies wrote. "The (debtor-in-possession) lender will also make additional edits to the term sheet and the club will submit its final (debtor-in-possession) terms this coming Monday."
The Hermitage opposes a motion filed by Harrington to convert or dismiss the case partly based on the companies' plan to poll creditors without first gaining court approval.
"As the club actually decided against polling, we believe we have sufficient evidence that we are operating within the rules of the bankruptcy code and will make arguments for continuing forward in the Chapter 11 case at the July 26 hearing," the email reads.
Reach staff writer Chris Mays at firstname.lastname@example.org, at @CMaysBR on Twitter and 802-254-2311, ext. 273.
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