Ultimate Escapes Appoints Chief Restructuring Officer Sheon Karol

By: Destination Club News
Date: August 27, 2010

Ultimate Escapes, the world's second largest and only publicly-traded destination club, has retained Sheon Karol from CRG Partners to serve as Chief Restructuring Officer as the club seeks to recover from a rather lean 2009 and 2010. According to the club's recent 10-Q filing outlining their first half of 2010, the club counted 1,214 members at the end of 2009. As of June 30, 2010, Ultimate Escapes had just 1,232 members. The document also stated that the club would take "steps to increase cash flow in order to cover 2010 operational expenses" and would be "monitoring and reducing operating expenses." Soon after their filing, Ultimate Escapes closed their Fort Collins branch and has now brought in Karol to help the club restructure.

Karol joined CRG Partners as a Partner in March of last year and has over 20 years of experience in the legal and executive world, with an emphasis on "out-of-court restructurings, bankruptcy proceedings, and mergers and acquisitions." His resume includes serving as a Financial Advisor to Grupo Mexico during is retention of equity in ASARCO's contested confirmation hearing, managing more than $200 million in asset sales for an $8 billion supermarket chain in Chapter 11, and providing general bankruptcy advice and managing operations for the restructuring of a $250 million medical diagnostic company. A former lawyer with a leading New York firm, Karol holds a bachelor's degree from Yeshiva College and is a Juris Doctor studying at Yale Law School.

Highly praised for their work, CRG Partners was named the "Turnaround Consulting Firm of the Year" at the 2010 M&A Advisor Turnaround Awards in March. "In a year of record bankruptcies and numerous successful restructurings, CRG Partners is honored to be recognized as this year’s 'Turnaround Consulting Firm of the Year,'" said William Snyder, Managing Partner with CRG Partners. "This award represents the great leadership and value that we aim to deliver to our clients each day."

We contacted CRG Partners to learn more but were told that they could not "confirm or deny" their association with Ultimate Escapes.

On April 30, 2007, Ultimate Escapes entered into a Loan and Security Agreement with CapitalSource that provided a revolving loan and a term loan that has since been repaid. The Loan Agreement was amended in October of 2007 and in February of 2008 and collateralized by substantially all of the club's assets. In July of 2009, the club received a notice of default from CapitalSource after failing to meet certain covenants as defined in the Loan Agreement. With the completion of the Private Escapes acquisition and restructuring, the club entered into a new loan agreement with CapitalSource that cured the default on the previous agreement in September of 2009. The loan agreement was amended in April of this year to change the borrowing base and to reduce the maximum loan amount. One of the new amendments to the agreement also stated that the club would be required to maintain a cash coverage amount of one month's debt service. At the time of their 10-Q filing, the club had less than one month's debt service in cash and cash equivalents.

The 10-Q form also painted a picture of their financial position during these lean economic times. Amounts stated by the club in thousands. "We currently do not have sufficient cash to sustain us for the next twelve months. We will require additional financing in order to execute our operating plan and continue as a going concern," wrote the club. "We incurred net losses of $12,965 and $23,222 during the years ended December 31, 2009 and 2008, respectively, and a loss of $10,802 for the six months ended June 30, 2010. As of June 30, 2010, our current liabilities, excluding $13,201 of deferred annual membership dues that we expect to recognize in income over the next twelve months, were $109,282, which exceeded our current assets of $4,441, by $104,841."

"We have also experienced a decrease in new membership sales and existing member upgrades over the last twenty-four months," the document continued.

Ultimate Escapes President and CEO Jim Tousignant is known across the industry for his many abilities. He turned Ultimate Resort from a small start-up into the world's second largest destination club when he acquired Tanner & Haley. He then acquired Ventures Equity Vacation Club to bring in more new members and properties and created the world's only publicly-traded destination club. For the sake of Ultimate Escapes and its 1,200+ members, let's hope Jim, Sheon, and the rest of the crew have some more cards up their sleeve.

We will continue to monitor Ultimate Escapes and the rest of the sector, so please check back frequently for the most up to date news available and request a free copy of our Destination Club Guide to learn more about the advantages and risks of destination club membership.