A condominium lodge was identified incorrectly in a photo caption accompanying a story June 15 about the Snowshoe Ski Resort in West Virginia. It is the Timberline Lodge at Snowshoe.
A federal judge in West Virginia has ordered a court-appointed trustee to submit plans next week for liquidating the assets of the Snowshoe ski resort near Slatyfork, throwing into doubt the future of the fourth-largest ski resort on the East Coast.
The Snowshoe Co., which has developed and sold more than 1,000 resort homes and condominiums on Cheat Mountain along with a ski resort that handles up to 5,000 skiers at a time, has been in bankruptcy court for over a year in an effort to keep creditors from foreclosing on its 8,000-acre property.
Judge Robert E. Maxwell, of the U.S. District Court for the Northern District of West Virginia, converted Snowshoe's Chapter 11 bankruptcy petition into a Chapter 7 liquidation two weeks ago, saying that "if we permit ourselves to flounder around for another year or two, and be tied up in details and technicalities, . . . we would be doing a great disservice to the state and the skiing industry."
Maxwell took the case after U.S. Bankruptcy Judge John H. Kamlowsky recused himself from further dealings with Snowshoe earlier this spring. In his decision to convert the case to a liquidation, Maxwell said that the "prospects for rehabilitation of the debtor Snowshoe as a profit-making business under the present management strategies and those that are suggested by the pleading as proposals for reorganization . . . appear to the court to be minimal, at the very best."
Property owned by Snowshoe that would be subject to the liquidation includes roughly 7,000 acres of undeveloped land, 106 acres of ski terrain with seven triple-car lifts, a partially completed airport and golf course, two lakes, seven tennis courts, a resort center building, a conference center with restaurant and lounge, and 73 improved building lots. The real property is valued at around $24 million, and there is $10 million of personal property, including 50 vehicles, snow-making equipment and other resort machinery.
Snowshoe has filed an appeal of the court-ordered liquidation, claiming that the bankruptcy proceeding held under Kamlowsky never gave Snowshoe "its day in court," and that Maxwell's reasons for the conversion to liquidation "have not adequately been shown" to exist. The court is expected to hold hearings on Snowshoe's appeal sometime in the next month.
This is not the first time Snowshoe, an ambitious ski resort in a remote area of West Virginia, has been in court. Since the first ski run was cleared in the early '70s, the resort has been plagued by bad winters and insufficient capital, leaving behind a tangled history that includes four separate bankruptcy petitions, an antitrust suit against its lead lender, Shenandoah Federal Savings & Loan Association, and a volley of accusations ranging from charges of fraud, nepotism, and mismanagement to self-dealing, conflicts of interest and shoddy construction.
"We've got super-duper assets, but we ain't got no cash," said Snowshoe President S. Franklin Burford when the company's third bankruptcy petition was filed in April 1984.
At that time, Snowshoe listed assets of $34 million and liabilities of $13.5 million, although the company now reports liabilities of over $15.5 million.
With the interest on Snowshoe's debt accruing at the rate of $2 million a year, Kamlowsky dismissed Snowshoe's third bankruptcy petition in February, on the grounds that it was filed in bad faith.
Snowshoe's plan for reorganizing the company and getting it back onto a sound financial basis was dependent on the company's finding an additional $5 million in new financing to complete a 9-hole golf course and develop more slope-side condominiums.
Snowshoe so far has been unable to find a lender to put up the additional capital.
Snowshoe Vice President Joseph F. Burford said last summer that once the golf course was finished, the resort would be able to attract visitors all year and no longer would suffer from the limitations of being a single-season resort.
"Everybody, including the bank, realizes we are on the very edge of turning four-season, and when we do, the benefits will be substantial," he said. "We've built a conference center and hosted conventions, but until the golf course is built, the resort will never be highly viable for summer recreation. Everybody in this industry knows that the capital expenditures of a place like this demand it be a four-season resort."
Shenandoah's lawyers, however, arguing to have the court appoint a trustee to manage the resort, said that the golf course would only be an "additional financial burden" and that the success of the debtor's plan was dependent on a significant increase in real estate sales on the mountain, a trend that Shenandoah believed to be "realistically impossible."
Doubts about the resort's health have already spread to the resort-home market in the area, lawyers for Shenandoah told the court.
"More and more foreclosures are occurring and more and more defaults are occurring on the loans" of people who own property on the mountain, said David W. Ralston, general counsel for Shenandoah.
Several of the other lenders for the resort also have been lending money to buyers of condominiums at Snowshoe, increasing their liability if the resort were forced to close down. The individually held real estate on the mountain is assessed at a total of more than $70 million.
At this time, there is little off-season activity at the resort and Shenandoah's lawyers claim that skier days at the resort have dropped from a high of 251,000 several years ago to 150,000 last winter. They also contend that the resort was developed haphazardly and has not been adequately maintained.
In an interim operating report filed with the bankruptcy court, Frank Burford said that while a number of conferences and bus tours are booked to use the facility this summer, "some of the customers talk of canceling because of the debtor's situation, while others indicate they intend to carry out the established arrangements."
The Burfords have denied Shenandoah's charges that they have mismanaged the resort and arranged deals with themselves by setting up their own construction company and other resort-affiliated activities.
The court records show, however, that Frank Burford admitted that he had borrowed from the Snowshoe company without paying interest and that at one point last summer, he had borrowed $10,000 in cash to post bail in case he were arrested by the state Department of Natural Resources.
The state has filed misdemeanor charges against Snowshoe for pollution violations, although Burford said in court that the problems with the sewer and water system at the mountain have been cleared up.
He also said that he has lent Snowshoe $200,000 without charging the company interest and has also infused $800,000 of his own money into the resort.
Bankruptcy Judge Kamlowsky held 16 days of hearings on the Snowshoe bankruptcy case before dismissing it in February to allow Shenandoah, which holds more than 80 percent of the liability of the company, to go ahead with foreclosure.
Snowshoe did not appeal Kamlowsky's dismissal of the case, but did file a new bankruptcy petition in mid-March, just days after the deadline for an appeal had run out.
Kamlowsky, who later admitted to being surprised and angered to hear of Snowshoe's fourth bankruptcy filing, told Snowshoe lawyer Sally Jackson, of Martinsburg, that if she filed the petition, he would dismiss it again for the same reasons.
Kamlowsky recused himself from the proceeding several days later after Jackson complained that he had tried to "intimidate her into not filing the petition." Kamlowsky said he was removing himself to defuse the possibility of numerous counter-motions from Snowshoe questioning the court's fairness. He said such a move was necessary to "expedite the issue and protect creditors from unfair expenses." Attorneys for both sides said the bankruptcy proceeding had already cost more than $500,000.
Snowshoe has protested the court order allowing Shenandoah to go forward with foreclosure, claiming that if the resort were sold, it would "be obtained by Shenandoah Federal Savings & Loan for a small fraction of its value and Snowshoe will be deprived of its opportunity for reorganization and rehabilitation as granted it by Congress under Chapter 11 of the bankruptcy code."
Snowshoe's $12 million antitrust suit against Shenandoah claims that the lender used information gained in confidence from its financial relationship to the resort to acquire, promote and develop a competitive ski resort in Beckley, W. Va., called Winterplace, and that Shenandoah threatened to withhold financial support from other support companies if they did not transfer their operations or sales to Winterplace.
Shenandoah lawyer Ralston called the antitrust charges "ludicrous," and said the court has told the trustee for the liquidation to review the case and determine whether Snowshoe should continue with the suit.