Solstice Collection Files For Bankruptcy

By: Destination Club News
Date: March 5, 2009

Proof that the economic downturn has affected nearly everyone, the ultra-luxury destination club Solstice Collection has filed for Chapter 11 bankruptcy protection.

Long the pinnacle of the upper tier of the destination club industry, known for architecturally stunning properties and yachts averaging $6.5 million each, Solstice is the latest of a string of closures and bankruptcies within the sector. In May of 2007, the club entered into a loan agreement with Fortress for approximately $23.6 million. Secured by the properties within the club's portfolio, Solstice has defaulted on the loan, leading to the bankruptcy filing.

While not the most advantageous of positions, the club and its members are working together to see what can be done to save Solstice. "Prior to filing for bankruptcy, the Debtors engaged the marketplace for financing," court documents state. "The only individuals willing to finance the Debtors during a bankruptcy proceeding are 24 Members, who have provided the Debtors with $1.3 million in proposed debtor-in-possession financing secured by a senior lien on the Properties other than the liens of Fortress under the Fortress Agreement...In most destination club cases, the ability to keep the members satisfied and motivated to keep paying membership dues is a critical component of the value of the club and a major attractive selling point to a strategic buyer or plan funder. In these cases, a large segment of the Members are actually providing financing needed in these cases and are participating in the decisions relating to the future direction of the destination club. Having this type of active membership is a significantly positive factor in favor of the Debtors' ability to reorganize...As discussed previously, the Debtors have a motivated and interested membership with the financial means and desire to preserve the destination club. As such, the Debtors believe that, with time, a reorganization of the Debtors' businesses is viable."

Pending Court approval, the club plans to enter into an agreement with Fortress to sell four properties to pay down the Fortress secured debt while also refinancing the loan. Carolynn Rockafellow, a member of the club, has been appointed to the role of CEO.

According to court documents, Solstice has 94 total members, eight from the club's elite Sky Membership, requiring a near $2 million membership deposit to join with annual dues of $86,000. The remainder of the club's members are near equally divided between the Platinum and Signature offerings.

The current economic malaise has claimed High Country Club, Yellowstone Club World, LUSSO Collection, and One Key World over the past several months, further exacerbating the problems for destination clubs as consumers grow more and more hesitant. Unlike these other clubs, it appears that Solstice still has a modicum of hope that some form of the club can be salvaged.

If you are a Solstice Collection member and would like to weigh in on this recent news, please feel free to contact us at contribute@destinationclubnews.com.