A federal bankruptcy judge in Harrisonburg, Va., this week denied a request from the owner of financially troubled Massanutten Village to reconsider a reorganization plan approved by the court last week to sell the resort to a Charlottesville partnership for $3 million.
Bankruptcy proceedings for Massanutten's parent First Federal Corp. and three subsidiary corporations have been pending for more than 10 months. First Federal filed under Chapter 11 of the U.S. Bankruptcy Code last December to forestall foreclosure by Union National Bank of Pittsburgh, the lead lender on the time-share and ski-resort development.
Last week Judge H. Clyde Pearson agreed to a plea from Union
"There's still hope that the money will come through," said a lawyer representing First Federal. "The debtor's plan would have brought $35 million." National Bank to allow the bank to foreclose and sell the property to Charlottesville developer C. Dice Hammer and James E. Lambert of Del Ray Beach, Fla.
First Federal Corp., however, argued this week that the court should allow the company more time to pull together a bailout plan that would net $35 million to pay off the many creditors in the tangled bankruptcy case. Creditors of the four debtor companies have filed claims for more than $50 million.
"There's still hope that the money will come through," said Mark Feldman, a Roanoke lawyer representing First Federal. "There would only be $10 million maximum coming out of the UNB plan, even under the best of circumstances. The debtor's plan would have brought $35 million."
"I don't feel that 10 months is that long," said Feldman. "Additional time is justified, but unfortunately the judge did not agree."
The plan proposed by First Federal called for selling the assets at Massanutten and a sister resort, Lake Placid Club Lodges in New York, to a consortium of companies. Included in the sale would be 50 percent of the ownership stock in a new company organized to continue time-share development at both resorts. John R. Swaim, the Florida developer who created time-sharing at Massanutten and Lake Placid, would retain ownership of the other 50 percent of the stock.
That plan was approved by the court earlier this summer but then revoked last week after a $350,000 earnest-money deposit demanded by the judge failed to appear. Many of the lawyers representing the numerous creditors had questioned whether the $35 million was a realistic offer or a delaying tactic on the part of First Federal.
Feldman said he also asked the court this week to consider appointing a trustee to market the resort instead of allowing Union National to foreclose, but that request also was denied. He said that First Federal had not given up hope that the bailout could still work and that company officials still were trying to pull together the financing. First Federal might officially appeal the court's decision within the 10-day appeal period if it needs some extra time to gather the funds.
John Sills, a Staunton lawyer representing Union National, said he was relieved the court did not grant First Federal's request to reconsider and that he doubted First Federal was anywhere near getting the $35 million needed for the bailout.
"If they had the money, they would have come forward with it," said Sills.
The appeal period will be up Oct. 12, and Sills said the bank would proceed at that point with transferring the Massanutten property to Hammer and Lambert. The partners will be purchasing the ski facilities and lodge, the hotel, 500 undeveloped building lots and the assets of the time-share development, including a number of unsold time-share weeks.