Court Documents Reveal More About Ultimate Escapes Bankruptcy Process

By: Destination Club News
Date: March 8, 2011

A declaration from former Ultimate Escapes Chairman Richard Keith has revealed more information about the downfall of the world's second largest destination club, including the proposed merger with Quintess and large sums he advanced to mortgage holders months before the bankruptcy filing.

"In 2004, together with others, I founded Private Escapes to compete in the destination club and resort industry," Keith writes in his declaration. "In summary, members of Private Escapes would pay a membership fee and an annual fee in exchange for the right to use the company's 'upscale' club and resort properties in various locations in the United States and internationally.

"In early 2007, I became acquainted with James Tousignant, who I understood owned and controlled Ultimate Resorts (sic), another company in the destination club and resort business.

"In or about September 2007, Private Escapes and Ultimate Resorts signed a 'definitive agreement' for merger of the two companies. The surviving company was to be known as 'Ultimate Escapes.'

"We expected CapitalSource to finance the merger and negotiations ensued. Absent approval by CapitalSource, the merger could not close and pending that approval, Private Escapes and Ultimate Resorts continued to operate, in cooperation with each other, under a 'Co-Branding Agreement.'

"The merger became effective in or about September 2009, with CapitalSource becoming the principal finance source and secured creditor of Ultimate Escapes. Principals and owners of the former Private Escapes owned about 8% of the post-merger entity; I owned approximately three-fourths of that (i.e., about 6% of the new entity). I also became a member of the board of directors and the Chairman of the Board.

"In late 2009, Ultimate Escapes became a public company and in early 2010, it began negotiating with Club Holdings LLC, dba Quintess for a merger. CapitalSource also financed Quintess.

"The merger talks with Quintess progressed positively, but by late summer or early fall 2010, the proposed merger of Ultimate Escapes and Quintess had not closed, awaiting, among other things, inputs and approvals from CapitalSource. In or about early September 2010, the merger talks failed and petitions under chapter 11 by Ultimate Escapes and its affiliates resulted on September 20 and 23, 2010."

In July and August of 2010, Ultimate Escapes was unable to pay much of the mortgage debt on their properties, at which point Keith would advance $56,169.32 for payments to mortgage holders. "This was at the time when the proposed merger with Quintess was still pending and appeared near closing. I agreed to make the advance(s) to avoid the negative impacts and publicity that would arise if the mortgage debt went into default; I proceeded to do so only because management concurrently agreed to secure repayment with the mortgage. My agreement to loan and the agreement of Ultimate Escapes to grant me the mortgage were dependent on each other and arose from the same discussions." On or about August 31, 2010, Keith loaned an additional $44,000 to the ailing club.

We are now approaching the sixth month mark from the Ultimate Escapes bankruptcy. Some members have joined Demeure. Others DUO by Quintess or Equity Estates. Despite the lack of chatter, the Ultimate Escapes story is far from closed. We have created a special Ultimate Escapes discussion on our new Destination Club News Forum. There you will be able to discuss the Ultimate Escapes bankruptcy with other members as well as any other news about the destination club industry. Registration is free and we look forward to your contributions.