Mountain Creek files for Bankruptcy

MOUNTAIN CREEK
FILES FOR BANKRUPTCY

SAM Magazine—Vernon,
N.J., May 17, 2017—The owner of Mountain Creek, Mountain Creek Management LLC,
is seeking Chapter 11 protection. The company hopes to restructure its debt
while maintaining daily operations, including opening the Mountain Creek
Waterpark next month.

In a
statement, Mountain Creek CEO Jeff Koffman said the bankruptcy filing stems
from "legacy debt we inherited from the property's former owners,"
specifically, about $26 million due to the Vernon Township Municipal Utilities
Authority for potential use of the town’s sewer system. That system was
expanded a few years ago in anticipation of a major year-round development at
Mountain Creek that has yet to occur.

That debt
obligation stems from a 2012 agreement in which the resort's former principal
owner, Gene Mulvihill, agreed to assume approximately 65 percent of the MUA's
debt for the buildout of the township's sewer system.

"We
remain committed to seeing Mountain Creek develop to its full potential with
new hotels, new outdoor attractions and expanded residential homes,"
Koffman said in his statement. "Our vision to create a world class,
four-season resort here in New Jersey is still our main objective and this move
will put us in the best position to achieve that," he said.

In a
press release, a Mountain Creek spokesperson indicated the filing would not
affect existing operations at the resort and would help attract outside
investment for planned ventures. The resort's waterpark is scheduled to open
the weekend of June 10-11 and seven days a week starting June 22.

"The
four-season resort, which offers gourmet restaurants, lodging and a variety of
outdoor sports and activities, will continue to operate fully during the
bankruptcy process," according to the press release.

Comments

  • From a local newspaper today....


    VERNON -- Ten months after filing for federal Chapter 11 bankruptcy protection, Mountain Creek has submitted a plan of reorganization setting forth how it intends to restructure nearly $30 million in debt.

    The court filing, which was announced by the resort in a statement Wednesday, is a first step toward what typically is followed in bankruptcy proceedings by negotiations with the various creditors aimed at developing a repayment schedule.

    Details of the plan were not immediately available.

    Topping the list of creditors is the Vernon Township Municipal Utilities Authority, to which nearly $26 million is owed as unsecured debt for more than $40 million in sewerage capacity the township purchased from the Sussex County Municipal Utilities Authority more than a decade ago -- a move taken under agreement with the resort when it was owned by Intrawest to enable the resort's future growth.

    Ultimately, if the resort fails to repay the $26 million, the township -- meaning the taxpayers -- will be on the hook for paying back all of it to SCMUA.

    Wednesday's announcement touted the ongoing commitment by the resort's current ownership to sorting out its finances and pursuing a host of projects announced to great fanfare two years ago, but was also notably short on specifics.

    Also left out of the announcement was any mention of two sewer debt payments to Vernon totalling nearly $700,000 that the resort has missed since Jan. 31, a new development that threatens to cast a pall over negotiations between the resort and the township.

    Only six months ago the Township Council refrained from drawing down on a $2 million letter of credit from Mountain Creek based partly on the resort's commitment to keeping current with the sewer payments, which it had been doing to that point. A letter of credit is a deposit for a specified dollar amount kept on file with a bank to protect a creditor or vendor in the event of a default.

    Mountain Creek CEO Jeff Koffman, whose family acquired principal ownership of the resort from the Mulvihill family in June 2015, expressed his desire in a phone conversation Wednesday to continue working cooperatively with the township in hopes of getting past the bankruptcy and refocusing on joint efforts to bolster tourism and economic growth in the region.

    Koffman said that prior to filing for bankruptcy, the resort paid off amounts that had been owed to several smaller creditors.

    But, he said, "The issue with sewerage is a much bigger issue, and we need to work with the town to come up with a solution on these old contracts that were made by the prior owners and prior (township) administrations."

    Mayor Harry Shortway, however, faulted the resort's current ownership for not living up to other commitments including the rebuilding of a sewage pump station off Sand Hill Road, behind the resort's Black Creek condominium complex, that the resort had originally been contractually obligated to replace five years ago and that is now said to be at risk of failing.

    He also faulted the resort for not following through on other plans, including the capital projects it announced two years ago and that were again touted in the Wednesday press release.

    "Why should a person in Barry Lakes be subsidizing Mountain Creek? Is Mountain Creek paying for their dam?" Shortway asked.

    "I want Mountain Creek to be successful, but I'm not going to look to the taxpayers to subsidize private businesses when we're already forcing people like the VFW and others to hook into the sewer system," Shortway said -- a reference to the ongoing controversy over forcing people to hook in as a way to defray the debt for excess sewerage capacity acquired by the township under its prior agreement with Mountain Creek more than a decade ago.

    Typically, in a Chapter 11 bankruptcy, a debtor has approximately four months to file a reorganization plan but can petition the court for an extension of up to 18 months. Once the plan is filed, a priority schedule for repaying secured creditors is established, with unsecured creditors such as Vernon being placed toward the bottom.

    Notwithstanding the ongoing bankruptcy proceedings, Wednesday's press release sounded a mostly optimistic note and made reference to several new projects, including an indoor waterpark that the previous owners had considered.

    The full text of the press release read as follows:

    "Mountain Creek filed its Bankruptcy plan of reorganization this week. The 2017-2018 ski season was very good and is going strong. Last year, it leased the ski area to Snow Operating, a well-known, experienced operator and it has turned out to be a good decision. Attendance was up over last year.

    "The reorganization plan provides for the refinancing of Mountain Creek's outstanding debt so that it will be able to make further improvements to the resort. (Its) balance sheet will have much less debt on it. Jeff Koffman commented that emerging from chapter 11 is just the first step in a host of capital projects planned for Mountain Creek. Being explored or planned are new housing, a winery, spa facilities, and indoor water park and a new hotel.

    "According to Koffman, he sees great opportunity at Mountain Creek, especially with the future opening of Legoland less than 20 miles away. He also said that the Appalachian Hotel has experienced a significant uptick in banquets, weddings and events.

    "The Chapter 11 was caused largely by financial commitments of prior owners of Mountain Creek and of the township that were improvident. Koffman finally said that it hopes to continue its good working relationship with the township, including the current mayor and town council, which were not in office when the financial commitments were entered."


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