"Sea Island Co. will operate as usual until the deal is closed." **
/Nevin Batiwalla of The Brunswick News has gone through the bankruptcy filing to detail the downfall of Sea Island where they managed to lose $175 million the past two years.
Mind you, these people are hosting a PGA Tour event his fall...
The documents include financial reports detailing huge annual losses, a request for a $5 million loan to stay afloat until the sale is finalized and a long list of who, and how much, the company owes.
And...
In 2008, Sea Island Co. suffered a net loss of $96.8 million. In 2009, it lost an additional $77.9 million, for a combined $174.7 million.
Typical media, it was only $174.7 million, not $175 mill!
Company representatives have said the change in ownership will be seamless and that Sea Island Co. will operate as usual until the deal is closed.
Now I hate to nitpick, but is operating as usual the best idea when you are losing that much money?
The company also owes 30 unsecured creditors, including Georgia Power, local businesses, pension claimants, contractors and golf course designer Tom Fazio, more than $60 million.
Just preparing the Faz for dealing with clients in China.
In bankruptcy documents, the company conceded that its stated $350 million renovation of The Cloister, which transformed the resort from a destination with a regional upper-class following to a playground for the global ultra rich, "proved to be more costly than budgeted." The renovation took place from 2004 to 2006.
How exactly do you go over budget on a $350 million project and keep around the people who did it? Just curious.
**Here's the Bill Jones III letter to the resort members referenced in the article.
August 11, 2010
Dear Sea Island Club Member,
As I shared with those of you who were able to attend our member meeting today, Sea Island Company has entered into an agreement that we believe represents a favorable outcome.
Following a robust process, Sea Island Company yesterday announced it has reached an agreement to sell substantially all of its assets to Sea Island Acquisition LP ("SIA"), a limited partnership formed by investment funds managed by the global investment firms Oaktree Capital Management, L.P. and Avenue Capital Group. The agreement includes The Lodge, The Cloister, The Cloister Spa and Fitness Center, The Sea Island Club, the Ocean Forest Golf Club, The Sea Island Beach Club, as well as our other golf facilities.
As we told you in January, our goal was to identify an investor with the financial strength that would enable us to address our debt issues and move confidently into the future. We believe we have accomplished our objective. Under the terms of the agreement:
Sea Island's businesses will remain intact, and the resort and golf courses will operate without any interruption in services.
All active employees of Sea Island Company will be offered employment by the buyer, and David Bansmer and I will continue in our current roles.
The buyer will introduce a new Sea Island Club and Ocean Forest Golf Club and all current club members will be offered membership in the new Clubs. Members' prior deposits would be credited by the buyer during the transition.
To help facilitate the sale - and to ensure it is completed in an orderly manner - Sea Island Company, Sea Island Coastal Properties, LLC and their subsidiaries have voluntarily filed for relief under Chapter 11 of the United States Bankruptcy Code. We will continue to operate our business as usual throughout this process with no changes in the services we provide. At the completion of the process, our businesses will be debt free.
Our lenders have signed a letter of consent confirming their support of the agreement. Additionally, you should know that this type of transaction is subject to a court-supervised auction. However, I can tell you that we are extremely pleased to have such a strong offer in hand. The transaction likely will be completed by the end of the year.
Of course, I understand you have questions about the future of your membership. Please understand that our commitment to you was carefully considered throughout this process. As a result, our buyer - working closely with Sea Island management - is developing a new membership program.
In general, here is what you can expect:
- After the transaction is complete, the new clubs will continue to offer the same quality of service and facilities that you have enjoyed in the past.
- As stated above, all members who are current will be offered the opportunity to sign a new membership agreement.
- If you choose to sign a new agreement, your deposit will be credited by the buyer, in the amount paid at the time you joined. To put it simply, your original paid deposit will roll over.
- The new Sea Island Club and the new Ocean Forest Golf Club will be able to accept new memberships after the conclusion of the transaction.
- As it has in the past, the program will include a very specific and formulaic process for handling resignations - for every five new members that join a Club, one will be refunded.
- For those members already on the resign list: If you want to remain on that list, and be in the queue to have your paid deposit refunded, you must first be current as well as sign a new agreement. You may return to your current position on the resign list, should you so choose.
- You will receive additional information from us over the coming weeks, and David and I will be happy to answer any questions you have about your membership. In the meantime, prior to the conclusion of the Chapter 11 process, all members should continue to pay dues monthly at the same rate paid during the 2009-2010 membership year.
In closing, I want to once again thank you for your support during this lengthy process. It has meant a great deal to me. And I want to tell you that I look forward, with great anticipation and enthusiasm, to moving forward with all of you. I am keenly aware that our success depends on the support of our members. Together we will work to secure our future for you and generations to come.
Sincerely,
Bill Jones III
Chairman and CEO
Sea Island Company
