A federal judge in West Virginia has allowed a court-appointed trustee for the Snowshoe Ski Resort to borrow $1.5 million to prepare the resort for the winter season, despite ongoing plans to liquidate the bankrupt company that owns it.
Judge Robert E. Maxwell, of the U.S. District Court for the Northern District of West Virginia, said he would allow the loan as part of an effort to keep the 8,000-acre resort operating while the trustee seeks a buyer. Maxwell said last June that he was reluctant to order Snowshoe's immediate liquidation because it provides nearly 500 jobs for eastern West Virginia.
Michael Bray, a Clarksburg attorney acting as trustee, estimated it would cost roughly $2 million to get the resort in shape for the upcoming season. Bray also said it was unlikely a buyer would be found before the ski season started, which would delay the court's liquidation plans until at least sometime next year.
Community Bank and Trust of Fairmont, W. Va., agreed to loan the resort the money if the court would allow its loan to be senior to the other debt on the property. Maxwell converted the resort's Chapter 11 voluntary bankruptcy petition into a Chapter 7 liquidation bankruptcy in May to pay off $15.5 million of debt.
Snowshoe is the fourth-largest ski resort on the East Coast, capable of carrying 5,000 skiers at a time on its seven triple-car chairlifts. The resort has had persistent financial problems since opening in the early '70s, and has filed for bankruptcy four times.
Shenandoah Federal Savings & Loan of Martinsburg, W. Va., which along with seven other banks holds $14 million in debt secured against the property, pleaded with the court last spring to convert the bankruptcy petition into a liquidation. Shenandoah has tried twice this year to sell the resort through a public auction, but has not attracted any bidders willing to pay the court-ordered minimum of $19 million.
Bray, as trustee, said that the estimated value of the resort ranges from $12 million to $35 million, and could drop by 50 to 90 percent if the resort were closed as part of the liquidation.
Skiers who own condominiums or town houses on Cheat Mountain say they also are concerned that the value of their vacation homes will plummet if the resort is closed. More than 1,000 homes are located on the mountain, with an estimated value of between $70 million and $100 million.
Property owned by Snowshoe Co. that would be subject to the liquidation includes about 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.
Maxwell took the case when U.S. Bankruptcy Judge John H. Kamlowsky recused himself from further dealings with Snowshoe earlier this spring, after a Snowshoe attorney claimed Kamlowsky had unfairly threatened to dismiss the fourth bankruptcy filing for the same reasons he dismissed the third bankruptcy petition.
Snowshoe has protested the court's conversion of its bankruptcy case to a liquidation, claiming that Kamlowsky denied Snowshoe "its day in court" by not holding a hearing on the reorganization plan.
Snowshoe this week filed a formal pleading appealing that decision, saying that chapter 11 of the U.S. Bankruptcy Code is designed to "prevent the unnecessary dismemberment of viable corporations," and that a Chapter 11 reorganization should have been allowed for Snowshoe.
Kamlowsky held extensive hearings last year on a motion from Shenandoah to have a trustee appointed to manage the resort during the bankruptcy. Shenandoah and other creditors have accused Snowshoe President S. Franklin Burford and Vice President Joseph F. Burford of mismanagement, self-dealing, conflicts of interest and fraud in their handling of the resort's development.
Kamlowsky dismissed that bankruptcy petition, Snowshoe's third, last February, on grounds that it was filed in bad faith. Snowshoe did not appeal that decision, but filed a fourth Chapter 11 petition just days after the deadline for an appeal had run out on the earlier petition.
Maxwell converted the Chapter 11 to a liquidation when he took over the case in May, 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."
Shenandoah S&L is expected to file a response to Snowshoe's appeal of the conversion plan within the next two weeks.