A federal judge in West Virginia said this week that he is "not inclined" to order the immediate liquidation of the Snowshoe Ski Resort near Slatyfork, because of concerns for people who own homes on the ski mountain, the health of the ski industry in West Virginia and unsecured creditors of the bankrupt resort.
Judge Robert E. Maxwell, of the U.S. District Court for the Northern District of West Virginia, ordered a court-appointed trustee several weeks ago to submit plans for liquidating the assets of the Snowshoe Co. after dismissing the fourth bankruptcy reorganization petition the company has filed in 12 years.
At that time, Maxwell said he was ordering the liquidation because he felt 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."
The trustee, however, told the court this week that closing the resort would cut its resale value by half and seriously hurt the values of residential real estate on the mountain. There are more than 1,000 homes owned by individuals on Cheat Mountain, with an estimated value of between $70 million and $100 million.
Trustee Michael Bray, of the Clarksburg, W.Va., office of the law firm of Steptoe & Johnson, told the court that continuing to operate only the essential services at the resort was costing about $23,000 a month and that operating it as a complete ski resort, including getting the resort in shape for the winter season, would cost about $2.3 million between now and November and bring in roughly $500,000 in revenue.
Snowshoe is the fourth-largest ski resort on the East Coast, with a capacity to carry 5,000 skiers at a time on its seven triple-car chairlifts. The 8,000-acre resort was started in the early '70s and grew rapidly, despite bad winters and continuing financial problems.
Shenandoah Federal Savings & Loan of Martinsburg, W.Va., which along with seven other banks holds $14 million in debt on the property, pleaded with the court to "help us get our money out." Shenandoah has tried twice this spring to sell the resort through a public auction, but because of a court-ordered minimum bid of $19 million has not attracted any bidders. The trustee said yesterday that estimates on the value of the resort range from $12 million to $35 million.
Snowshoe Co. President S. Franklin Burford has charged Shenandoah with trying to take over the resort through foreclosure, and has even filed an antitrust suit against the lender. Burford has tried unsuccessfully for more than a year to find between $5 million and $9 million in additional financing to make the resort into a four-season center.
Judge Maxwell took the case after U.S. Bankruptcy Judge John H. Kamlowsky recused himself from futher dealings with Snowshoe earlier this spring. In his decision to convert the bankruptcy 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."
David Ralston, a Reston attorney representing Shenandoah, said that "we see no inconsistency with running the resort while seeking out potential purchasers, but if the court is not successful in that there should be a court-administered sale within a reasonable time."
Bray told the court this week that he was talking with other lenders about borrowing between $1 million and $2 million to keep the company operating through the summer but that there had been no final commitment yet from any bank to invest in the resort.
Skiers who own condominiums or town houses on Cheat Mountain say they are concerned that the value of their vacation homes will plummet if the resort is closed down. The ski area is in a remote part of West Virginia, with few alternative vacation activities nearby other than those provided on the grounds of the resort.
"We're worried that the resort will close down," said James Cohill, who recently built a vacation house on a parcel at the base of the mountain. "That would be a real problem."
Nancy Hamrick, who with her husband owns a one-acre lot, said the news that the court was hesitant to close the resort as part of the liquidation was "reassuring."
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 the chair 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 about $24 million by the debtor, and the company claims it has an additional $10 million worth 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." The judge told Bray to give him another interim report on the resort in 30 days, and Bray said he might have a recommendation then on whether the bankrupt company would continue with its antitrust suit against Shenandoah.