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The Greenbrier Sold for $20.1 million?

By George Hohmann, Charleston Daily Mail, W.Va.McClatchy-Tribune Regional News

May 12, 2009 - LEWISBURG, W.Va. -- Lawyers for The Greenbrier Resort have asked for its bankruptcy case to be dismissed in light of Jim Justice's purchase of the resort's stock.

The request was filed late Friday in U.S. Bankruptcy Court at Richmond, one day after Justice said that his Beckley-based Justice Family Group paid CSX Corp. $20.1 million to acquire the stock of the resort's holding company.

The lawyers said the only purpose for filing bankruptcy in March was "to facilitate a sale or restructuring that would ensure The Greenbrier continues operating as a going concern under new ownership for the benefit of all parties in interest." The sale to Justice achieves that goal so "the bankruptcy cases no longer serve any necessary restructuring purpose," the lawyers argued.

The resort's lawyers also asked Judge Kevin Huennekens to shorten the normal notice for a hearing and to hear their motion next Tuesday. They want responses to their requests to be filed by Friday.

Marriott Hotel Services Inc., which signed an agreement in March to buy The Greenbrier for up to $130 million, could object to the requests. Marriott spokesman Tom Marder said on Thursday that the company intends to fulfill its obligation to acquire the resort and expected CSX to abide by the agreement. Marder said on Monday, "We received a copy of the pleadings before the bankruptcy court and are reviewing the documents. We will respond to the court at the appropriate time."

Football legend Sam Huff has been trying to organize homeowners around the resort so they could make a bid. On Monday Huff said he would still like to put a group together.

"It's been sitting there a long time now," Huff said of The Greenbrier. "All of a sudden it's in demand again. It's kind of crazy, with the economy the way it is. It was sold for $20 million? That's chicken feed in the hotel industry. Six thousand acres -- how much is that per acre? I'm not a mathematician but I can figure that out in my head. I'm a pretty good businessman. If somebody would have told me, 'Sam, if you're interested in The Greenbrier, you come up with $20 million and it's yours,' I would have come up with $20 million and run over to The Greenbrier."

Huff said that on the one hand, "I feel sorry for everybody involved." The Greenbrier's employees thought they were doing a deal with Marriott and now they may be dealing with Jim Justice. "The poor employees have got to be on a merry-go-round," he said. "Those are the people who have to live it. That's got to be tough for them.

"I'm just kind of disappointed that all of this has taken place because all of this seemed to line up -- the union agreed to a contract, (Gov.) Joe (Manchin) said it was great, Marriott said it was great and everything was on course. And then the bottom falls out of it."

On the other hand, Huff said, "This could maybe in the long run be a good deal.

"How do you bypass the federal court?" Huff asked. "One thing I've learned the hard way since getting my education under Pappy Lewis is, a contract is a contract," he said, referring to Art (Pappy) Lewis, West Virginia University's head football coach from 1950 to 1959.

Huff said that soon after signing a pro football contract with the New York Giants in 1956 for $7,500, he asked team owner Tim Mara for an increase and a bonus. "Mr. Mara said, 'Sam, a contract is a contract.' That's what I learned early in life."

Justice owns and operates coal mines and farms. He's never been in the hotel business. Justice's purchase of The Greenbrier "is like me going into a business I don't know," Huff said. "I did that one time in New York. It was Chicken Delight. I know one thing -- I lost a lot of money quickly and I got out of it."

In their motion to dismiss the bankruptcy case, The Greenbrier's lawyers argue that under the resort's sales agreement with Marriott, the Marriott's "sole remedy" is to receive the return of its deposit, a break-up fee, and reimbursement for expenses.

Marriott made a $3 million deposit when it agreed to purchase The Greenbrier. The resort agreed to pay a $2 million break-up fee if it was sold to anyone else; if another plan was developed that would continue the operation of the hotel; or if the resort's assets were liquidated. The Greenbrier also agreed to reimburse Marriott up to $600,000 for reasonable expenses.

The Greenbrier, in consultation with CSX and Goldman, Sachs & Co., CSX's financial adviser, began an extensive marketing effort in August 2008 to sell the resort or its assets to a party willing to operate it as a going concern, according to Friday's filing.

Prior to the March 19 bankruptcy, "no party expressed any interest in acquiring CSX's stock in The Greenbrier Resort and Club Management Co.," the resort's lawyers said. "Rather, the only parties to express any interest in a transaction sought to acquire the debtors' assets in connection with a restructuring of certain of the debtors' debts and contractual obligations. The debtors engaged in extensive pre-petition negotiations with potentially interested parties and ultimately selected Marriott Hotel Services Inc."

On March 23 the resort filed a motion establishing procedures for a bankruptcy court auction but anticipated that the buyer would be Marriott. The sales agreement between The Greenbrier and Marriott called for Marriott to acquire the resort's assets free and clear of liens; for new labor agreements with the resort's unions to be in place that were acceptable to Marriott; and for CSX to provide Marriott with up to $50 million to facilitate the sale. The bankruptcy court approved the terms.

Justice's representatives approached Goldman Sachs in late April, according to the Friday filing.

"Prior to engaging in any sale discussions with the Justice Family Group, Goldman Sachs and CSX reviewed the Justice Family Group's financial qualifications," the lawyers said. The review "established that the Justice Family Group was well-qualified financially, and after execution of a confidentiality agreement, CSX commenced discussions and negotiations."

CSX and Justice agreed to a deal last Wednesday, the lawyers said.

Justice agreed to "generally continue operating The Greenbrier for at least two years. . .at standards consistent with maintaining a AAA Five Diamond rating." Justice also agreed to cause The Greenbrier to satisfy existing third-party debt in the ordinary course of the resort's business. In addition, he agreed to cause The Greenbrier to return Marriott's deposit, pay Marriott the break-up fee, and reimburse the Marriott for expenses.

"The debtors' bankruptcy cases no longer serve any meaningful purpose," The Greenbrier's lawyers said. "As a result of the recent change in ownership, the debtors no longer have any need or desire to pursue an asset sale or the restructuring of their debt or contractual obligations in bankruptcy. The debtors now have the financial resources and available capital to satisfy their existing unaffiliated debt in the ordinary course of business outside of the bankruptcy process."

If the case is not dismissed, The Greenbrier will have to endure bankruptcy for several more months. This "is not a mere administrative inconvenience," the resort's lawyers said. "Rather, it is an expensive and prejudicial business interruption.

"Maintaining The Greenbrier's reputation for quality and excellence is critical to success in the highly competitive luxury resort industry," the lawyers said. "Operating under the stigma of bankruptcy inevitably drives away potential guests and places The Greenbrier at a competitive disadvantage."

Contact writer George Hohmann at business@dailymail.com or 304-348-4836.

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Copyright (c) 2009, Charleston Daily Mail, W.Va.

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