Baker Hostetler Orlando partner Elizabeth A. Green was quoted in the article, “Timeshare Companies Want Funding in Bankruptcy,” that appeared in the South Florida Business Journal and Bizjournals.com on February 1, 2011.
The article cites four large Florida-based timeshare companies and how they are struggling with the economic downturn and the pullback of lenders in the market. Grand Seas Resort, Tempus Resorts International, Island One Resorts and Celebrity Resorts have all recently filed for bankruptcy. Textron Financial Corp. and GMAC, two of the biggest lenders in the industry, have pulled out of the market.
Green says, “That’s a problem because the way these companies make their money is by pledging their paper, their receivable loans. The problem is no one has really stepped in and taken up that slack.”
Island One Resorts has multiple properties, mostly in Orlando, but includes Crescent Resort in South Beach. According to Green, who is representing Island One and Tempus Resorts in their bankruptcies, the Crescent Resort has the potential to be sold separately in a sale of Island One Resorts because the only lender involved is Textron and it is structured under a separate company, Crescent One LLC. Island One filed for voluntary Chapter 11 reorganization in September 2010. Green said, “A sale of assets in a timeshare bankruptcy is complicated by the factional nature of ownership.”
One of the biggest challenges in the recent timeshare bankruptcies is placing a value on the timeshare portfolio. Green said, “So you have a fight over the value of the sold timeshare portfolio and a fight over the value of the unsold timeshare inventory. The debtor might want the lower to spread out payments or it might go in the other direction.”
Green predicted new lenders will eventually enter the timeshare market again, but not until it stabilizes.