|By George Hohmann, Charleston Daily Mail,
W.Va.McClatchy-Tribune Regional News
May 19, 2009 - CHARLESTON, W.Va. -- Jim Justice, the new owner of The Greenbrier Resort, said he's anxious to get beyond bankruptcy court proceedings and on to the actual running of the hotel.
Justice's lawyers are due in court in Richmond this morning to formally ask Judge Kevin Huennekens to drop The Greenbrier's bankruptcy case.
The hearing comes two weeks after Justice, in a surprise turn of events, announced that he had purchased the stock of The Greenbrier's holding company from CSX Corp. for $20.1 million.
Up until Justice's announcement, it looked like Marriott International was going to buy the resort. Marriott and The Greenbrier signed a sales agreement. But Justice and Richard "Rick" Hoffman, Marriott's executive vice president of mergers, acquisitions and business development, met over the weekend. They agreed to work on a marketing plan and Marriott dropped any objection to Justice's purchase of the resort.
"We came to an agreement that is two-fold," Justice said. "We have 30 days in which to agree on a marketing plan. Marriott would be paid a fee for bringing guests in. We also agreed that this would not be marketed as a Marriott but as The Greenbrier, and that we would have the right to market it as well as Marriott."
If a marketing agreement is reached, The Greenbrier would have access to Marriott's national and international reservations system and Marriott would receive a fee for each guest it brings in.
This would help cure one of The Greenbrier's weaknesses: operating as a stand-alone, independent property. In a March 31 business travel column in The Washington Post, Joe Brancatelli pointed out that a handful of global chains dominate the hotel business and only about half of the top luxury hotels or resorts still operate as independent properties.
"Marriott and I both agree that my being so committed, with my passion level and being here with the employees, I may have an edge in running it better," Justice said. "The second thing is, if I do any type of improvement, whether it's upgrading or building a casino, I'm doing it with my dollars, so Marriott is not putting any money in it.
"The plus for me is, Marriott can supply their network of marketing, which is maybe second to none in the world. You put this all together and you have the ingredients of a real win-win."
The Greenbrier had agreed to pay a $2 million break-up fee plus up to $600,000 in expenses if it was sold to anyone other than Marriott.
Justice said that under his agreement with Marriott, "the breakup fee changes to $7.5 million if we can't come to an agreement" in 30 days and Marriott walks away. "Which neither of the parties want to come about because both believe we have an arrangement here that can be beneficial to both of us for many years to come."
Justice said he has reached a new collective bargaining agreement with The Greenbrier's unionized employees that is "sweetened considerably" compared to the deal the workers had agreed to with Marriott. The agreement includes:
--Improved healthcare provisions.
--A 401 (k) retirement savings plan with up to a 3 percent match. The hotel's old pension plan is now gone -- "the essential liability stays with CSX," Justice said. He could not say how much that liability is.
--A meal benefit. "Employees are able to eat one meal a day" at the resort. "That basically costs The Greenbrier about three-quarters-of-a-million dollars a year that had been eliminated and we put it back in."
Overall, "the package of upgrades we put back in probably meant an upgrade to employees of about $3.5 million," Justice said.
In addition, Justice has promised all employees that when the hotel earns the prestigious five-star rating from the Mobil Guide, they'll all receive a one-time payment equal to 10 percent of their gross pay. "That's a big bump," he said. "Everybody is now invested in the 5th star effort and that's really good."
The Greenbrier lost its 5th star in 2000. CSX invested $50 million on improvements a few years ago, but the resort has not regained Mobil's top rating.
Justice said, "The union people have voted overwhelmingly in favor of the new proposal and the upgrades we've put back into the agreement."
The Legislature recently revised a law that allows The Greenbrier to operate a casino. Justice has said he plans to start work on it soon. He praised Gov. Joe Manchin for being "so wise in structuring this." Justice said that while other gambling legislation requires racetracks to pay a portion of their handle to horse or dog trainers, The Greenbrier legislation directs a portion of the casino's handle to an employee benefit fund.
"We project that to be at $5 million a year," Justice said. "We're very hopeful that will be another real kicker to the employees. I said to the employees that my dream is that the jobs here will be the envy of the world from the standpoint of benefits and all the other tangibles that go with it."
CSX put The Greenbrier in bankruptcy in March and provided $19 million in debtor-in-possession financing to keep the resort operating. CSX was so desperate to unload the property it agreed to loan Marriott $50 million to run the hotel. Marriott would have repaid the loan and within seven years would have paid CSX between $60 million and $130 million, depending on the hotel's financial performance.
Justice said his offer was better because he agreed to put up the $19 million debtor-in-possession financing and a $50 million loan was not required. That saved CSX $69 million in outlays, he said.
"They (CSX) got $20.1 million when they may have gone through this process and netted zero or less than zero," Justice said. "This gave them better economies and absolute certainty."
The Greenbrier racked up more than $90 million in losses in the past five years. Those losses and about $1 million more in expenses were financed by CSX, according to bankruptcy filings. Justice said CSX has in essence forgiven that debt and will write it off. The debt has been dropped into a new entity that Justice owns and controls so he can decide whether to ever repay it. Justice said any adverse tax consequences are his responsibility.
The resort owes just over $2 million to other creditors. If he is successful in getting the bankruptcy case dropped, "all of the (other) creditors will be paid in full," Justice said.
In its original bankruptcy filing, The Greenbrier reported $141.7 million in assets and $107.4 million in liabilities. Justice was asked how it came to pass that he paid $20.1 million for the resort when it had a balance sheet that was $34.3 million to the good.
"That was through a negotiation with CSX," he said. "That was a compromise value that we both agreed to."
Justice praised CSX. "They genuinely cared about the employees and wanted this to go back to a five-star resort," he said. "They have been an instrumental player to the good side, doing something genuinely good for employees and the preservation of the resort. Naturally they got a better deal from the economic side and better certainty but they did something really good here, too."
He also praised Marriott. "They stepped up in a first-class way," he said. "They've settled on something that becomes a win-win for everybody. And they did it in a tasteful and great way."
Once he gets the bankruptcy case dismissed, "the next order of business is to get on with the actual running of the hotel," Justice said. "There are things that, if you're a production-oriented person like I am, you want to do -- a marketing plan to get our guests back, starting work on the casino. I hope to make repairs and upgrades to the grounds that are pleasing to the guests -- all of the things that are production-oriented rather than legality oriented.
"Right now we're going through the deal process and lawyers out the ying-yang and going to court. Those are things no question you've got to do but I'm a guy who will enjoy the actual production of something, whether it be mining a ton of coal or harvesting a bushel of corn or growing an extra 50 Christmas trees.
"I don't know how this story cannot turn out to be great," Justice said. "I don't try to impose my conviction on anyone but I believe the Good Lord is guiding this whole process. There were a lot of people hurting. We've been able to make a lot of good things happen here. I'm humbled to be a part of all the goodness that is going on."
Contact writer George Hohmann at firstname.lastname@example.org or 304-348-4836.
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