The Potential Buyers Of Ultimate Escapes

By: Destination Club News
Date: September 24, 2010

The potential sale of Ultimate Escapes has gained momentum following their bankruptcy filing earlier this week, and according to the many court documents, CRG Partners, the restructuring firm retained by Ultimate Escapes, has already contacted hundreds of potential buyers and are actively engaged in discussions with a select handful that are keenly interested in purchasing the world's second largest destination club.

According to court documents, CRG Partners developed a list of "strategic or financial entities most likely to purchase" the assets of Ultimate Escapes, engaging a firm named Digital Strategies Group, Inc. to research commercial databases and public data sources to broaden the list.

CRG Partners contacted approximately 411 of these potential buyers, each of whom received information about Ultimate Escapes operations and finances. CRG forwarded off 35 non-disclosure agreements to interested parties and received 23 executed non-disclosure agreements back. CRG reached out to each of these parties for more substantial talks regarding the parameters of the potential sale. Since then, five additional potential buyers have submitted non-disclosure agreements that are currently under review.

Follow up meetings with each of these potential buyers included discussions on the club's operations, historical performance, future outlook, and any due diligence questions posed by the potential buyers. According to the filings, "several potential buyers expressed an initial indication to acquire substantially all of the Debtors' assets, including four potential buyers who have submitted letters of interest for some or all of the Debtors' assets.

The Purchase Agreement states that the closing of the sale must take place within 30 days after entry of an order approving the sale. "I believe there is substantial risk of depreciation of the value of the Acquired Assets if a Sales in not consummated quickly," writes Ultimate Escapes Chief Restructuring Officer Sheon Karol.

The court documents also go on to later discuss Ultimate Escapes membership list. "The member lists and other identifying information regarding the Debtors' members are important and valuable assets to the Debtors' estates. It has been the practice of the Debtors to maintain this membership information in strict confidence and not to publish or disclose the information to third parties. This information constitutes highly-sensitive commercial and proprietary information which, if made publicly available, could be used by the Debtors' competitors to their advantage and to the detriment of the Debtors' businesses. To protect this valuable asset, a motion to file the Debtors' membership information under seal has been submitted to the Court. I believe that if the Debtors' membership information is revealed, the Debtors' competitors will likely use this information to solicit the Debtors' members and interfere with the membership relationship such that the Debtors will suffer a reduction in members which will likely dilute the value of the Debtors' estates and impede the Debtors' ability to sell their business as a going-concern or effectively reorganize."

The properties attached to the Ultimate Escapes bankruptcy will likely be the major discussion point during these discussions, but the members arguably have the greater value. The annual dues paid by members are the lifeblood of any destination club and are used to offset the club's annual costs, including staffing, maintenance on the club residences, taxes, and the other associated costs of global portfolio of properties. If the eventual buyer does elect to form an "Ultimate Escapes 2.0," they will first have to regain the trust of some understandably angry members, but as one source close to the bankruptcy told us, "There is a great opportunity for the right buyer."