IF THESE WALLS COULD TALK: Circus on the slopes

Private ski and golf resort Yellowstone Club was at one time an ultra-private escape for its ultra-wealthy members, including Microsoft founder Bill Gates and former US Vice President Dan Quayle.

Yellowstone Club

So private was the club, that its director of security once led US President Gerald Ford's secret service detail and reportedly ordered the perimeter to be patrolled by helicopter. However, the elite enterprise has now been dragged into the spotlight by the acrimonious divorce of founders Tim and Edra Blixseth and the club's subsequent spiral into bankruptcy.

Billionaire timber magnate Tim Blixseth and his wife founded Yellowstone in 2000 as a family retreat adjacent to Big Sky, Montana. Momentum began to build as the couple's close friends became interested and the property was transformed into a 13,600-acre exclusive community with a private ski slope, and later a golf course.

Its initial policy was that prospective members had to show a net worth of at least $3 million, put down an initiation fee of $250,000 and pay $16,000 in annual dues. They were then required to buy property averaging $1.4 million for a two-acre lot and pay for the cost of constructing a home. Of 864 potential home sites, roughly 340 are currently occupied by members.

The contentious divorce between Yellowstone's founders though has put a dampener on Yellowstone's activities. Edra reportedly bought out her husband's 50 percent stake in August 2008, with the aid of a $35 million loan from Sam Byrne's private equity real estate firm, Boston-based CrossHarbor Capital Partners.

Earlier that year, CrossHarbor threw its hat into the ring over Yellowstone, offering to buy the club for $470 million, a deal that later fell apart as Yellowstone slid towards bankruptcy.

Byrne has both a personal and professional interest in Yellowstone. In addition to being a member since 2005, CrossHarbor is heavily invested in developing resort properties at the resort, Byrne told local news website www. NewWest.net. The firm has invested more than $150 million in the resort's Sunrise Ridge Condominium project, as well as developing five single-family sites, projected to be worth $35 million, and $55 million of golf course lots.

CrossHarbor real estate firm has swooped in again with a $100 million stalking horse bid to buy the club outright, combined with an agreed $75 million to reorganise the club and $7.5 million to pay creditors.

In November last year though, Yellowstone filed for Chapter 11 bankruptcy protection, unable to balance falling revenues and its debt load. Once again, CrossHarbor was on hand to help the club, providing $20 million of debtor-in-possession financing.

Now though, the real estate firm has swooped in again with a $100 million stalking horse bid to buy the club outright, combined with an agreed $75 million to reorganise the club and $7.5 million to pay creditors. Additional bids could lead to an auction in May.

According to Byrne, CrossHarbor plans to shift Yellowstone's landscape from single family lots to high-density development, with possible plans to develop the resort's Eglise mountain.

However, when it comes to Yellowstone, things are never as simple as they first appear. For Byrne, the bankruptcy has already taken on a “circus atmosphere”, with arguments raging over a $375 million Credit Suisse-led loan made to Yellowstone in 2005.

Yellowstone members are battling over the way the loan was used by the Blixseths saying much of the loan proceeds were used on a failed global expansion and other personal investments and expenses, leaving Yellowstone with a pile of debt.

According to reports, Credit Suisse is arguing misuse of the funds and alleged “fraudulent transfer”. At the same time, the Swiss bank is also battling CrossHarbor's bid, saying that the bankrupt club has done nothing to solicit or encourage other possible buyers, and together with CrossHarbor has actually made it all but impossible for others to get involved in a bidding process. Credit Suisse is still owed $310 million of the loan proceeds.

And that's not all. Former owner Tim Blixseth could throw another fly in the ointment if he follows through with his declared intention to bid for Yellowstone in the bankruptcy auction. The only thing CrossHarbor can be certain of is that this circus is far from over.