Epic Resorts

Client

Epic Resorts, LLC was a developer, manager and financer of time share vacation ownership interests. The Company operated six resorts throughout the United States and had approximately 500 employees. The Company was forced into an involuntary bankruptcy in July 2001 and converted to a voluntary proceeding in November 2001.

Challenge

Epic was forced into bankruptcy because the Company was unable to arrange financing for the sale of vacation ownership interests. Post filing, the CEO transferred resort management contracts, without receiving equivalent value, to a newly formed company, which he owned. The Court removed the CEO from certain operations and appointed a Bridge professional as Chapter 11 Trustee for the Debtor's business which primarily held title to resort real estate. However, the Court did not remove the CEO from resort operations. This bifurcated management structure prevented the Company from unlocking key tangible real property value, which was needed to provide some measure of return to secured creditors. In addition, the resort operating results were creating a liquidity crisis, primarily due to below- market pricing. The resort operating results created a liquidity crisis, primarily due to below market pricing. The situation at EPIC was made more acute because Bridge found that proper financial records had not been maintained for approximately two years; assets were severely overstated while material liabilities had not been recorded; assets were comingled; and, improper transfers had occurred between independent legal entities.

Solution

Bridge immediately began litigation to gain control of the resort management contracts controlled by the former CEO. This matter was settled after protracted litigation, which included significant testimony by Bridge professionals. Concurrently, Bridge implemented a number of performance improvements aimed at increasing the value of consumer note portfolios, which were the main source of operating cash. Bridge developed multiple restructuring scenarios, which revealed that the highest return to creditors would be accomplished through a sale of substantially all operating assets. Bridge also identified, tracked, valued the Company’s commingled and mishandled assets and liabilities and produced reliable statements to enable buyers to properly evaluate the business.

Results

Operations were stabilized to a point where the primary business became cash positive, excluding capital expenditures and bankruptcy related expenses. Bridge was able to secure DIP and other financing of approximately $8 million to support the operations through the litigation and restructuring. Bridge managed the sale of virtually all of the Company's assets for a total of approximately $20 million.