Ultimate Escapes Bankruptcy Q&A With Sheon Karol

By: Destination Club News
Date: September 25, 2010

Since Ultimate Escapes filed for bankruptcy earlier this week, the club's 1,000+ members have had a surplus of questions about the filing, their future travel plans, and the security of the refundable membership deposits paid to join the club. Ultimate Escapes and Chief Restructuring Officer Sheon Karol addressed some of the more general questions that have been posed by members in a recent document. Below, please find their responses to these frequently asked questions and our commentary below.

Where and when was the Bankruptcy Case filed?

Ultimate Escapes (UE): The Bankruptcy Case was filed in the United States Bankruptcy Court for the District of Delaware on September 20, 2010. The Primary Case No. is 10-12915.

DCN Commentary: The Ultimate Escapes bankruptcy filing revealed a great deal of information about the club. According to court documents, Ultimate Escapes estimates between $10 million and $50 million in assets, $100 million to $500 million in liabilities, and upwards of 5,000 creditors.

Does this mean that the Company is completely out of business?

UE: No. The Company will continue to operate with the protection and supervision of the Bankruptcy Court. The Company has requested that the Court appoint Sheon Karol, who currently serves as our Chief Restructuring Officer, to continue in that role. If approved, Mr. Karol will oversee the day to day operations of the Company.

DCN Commentary: Karol has already contacted members, stating that the bankruptcy process will likely take between 30 and 45 days and as the next question mentions, members will be able to continue to travel for a limited time.

Will I still be able to travel?

UE: The Company has funding as a "Debtor in Possession" for 30 days. The Company has authority to honor existing reservations, in its discretion, at the residences below for travel within this period. However, reservations for travel through October 19, 2010 at any other residence within the Company's portfolio of residences not on the list below have been cancelled. The Company will maintain the list of all future reservation so that any potential purchaser of the business as a going concern can choose whether or not to honor them as part of their proposal to members. The ability to honor reservations beyond such period will be subject to the outcome of the any plan developed in the bankruptcy.

The residences at which reservations will be honored during the funding period are:

  • Abaco, Bahamas - Elite - Abaco Club #42
  • Abaco, Bahamas - Elite - Abaco Club #43
  • Abaco, Bahamas - Signature - Abaco Club #6
  • Beaver Creek - Elite - Beaver Creek Lodge
  • Big Island, HI - Premiere - Maluhia
  • Big Island, HI - Premiere - Wailana
  • Chicago - Premiere - Lincoln Park
  • Copper Mountain - Signature - Super Bee
  • Deer Valley - Elite - Silver Lake #2
  • Deer Valley - Elite - Silver Lake #6
  • Delray Beach - Elite - Ocean View
  • Indian Rocks Beach - Elite - Beach House
  • Jackson Hole - Premiere - Teton Mountain Lodge
  • Jackson Hole - Signature - Snake River Lodge #231/232
  • Jackson Hole - Signature - Snake River Lodge #339/340
  • Kiawah - Elite - Windhaven
  • Kiawah - Premiere - Night Heron
  • Kiawah - Signature - Broomsedge
  • La Costa - Signature - La Costa Resort #7
  • La Quinta - Premiere - Montana
  • La Quinta - Premiere - Laguna
  • La Quinta - Signature - PGA West
  • Lake George - Signature - Sagamore
  • Lake Las Vegas - Elite - Tramonto
  • Lake Tahoe - Premiere - Third Creek
  • Lake Tahoe - Signature - Caddie Court
  • Los Cabos - Elite - Casa Eternidad
  • Los Cabos - Elite - Villa Paraiso
  • Los Cabos - Elite - Esperanza 1501
  • Los Cabos - Elite - Esperanza 1502
  • Los Cabos - Elite - Esperanza 1503
  • Los Cabos - Premiere - Casa Oceano
  • Los Cabos - Premiere - Villa Rubi
  • Los Cabos - Signature - Casa Paraiso
  • Los Cabos - Signature - Casa Martha
  • Los Cabos - Signature - Villa del Sol
  • Los Cabos - Signature - Casa Tortuga
  • Los Cabos - Signature - Esperanza 1601
  • Los Cabos - Signature - Esperanza 1602
  • Los Cabos - Signature - Esperanza 1603
  • Maui - Elite - Wailea #208
  • Miami Beach - Signature - Acqualina
  • Naples - Signature - Strada Bella
  • NYC - Elite - Trump #300/301
  • NYC - Elite - Trump #302/303
  • NYC - Elite - Trump #310
  • NYC - Premiere - Link #29C
  • NYC - Premiere - Trump #318
  • NYC - Premiere - 1600 Broadway #18F
  • NYC - Signature - Trump #308
  • NYC - Signature - Trump #1222
  • NYC - Signature - Trump #1622
  • NYC - Signature - Link #31B
  • Outer Banks - Premiere - Osprey
  • Outer Banks - Signature - Hunters Green
  • Punta Mita - Premiere - La Playa
  • Reynolds Plantation - Premiere - Carolyn's Pond
  • Scottsdale - Elite - Happy Valley
  • Scottsdale - Elite - The Rocks
  • Scottsdale - Signature - Highpoint
  • St. Thomas - Elite - Lovenlund Estate
  • Steamboat Springs - Premiere - Eagle Ridge Lodge
  • Steamboat Springs - Signature - Mountaineer
  • Stowe Vermont - Premiere - Topnotch #512
  • Sun Valley - Elite - MacKenzie Lane
  • Sun Valley - Elite - Plaza #2
  • Telluride - Signature - Cabin #4
  • Telluride - Signature - Cabin #8
  • Turks & Caicos - Signature - Dundee Estate
  • Tuscany - Premiere - Borgo di Vagli

DCN Commentary: This "limited number of residences" as referred to by the club removed all of the leased properties in the Ultimate Escapes portfolio as well as a great deal of other residences in popular destinations like Abaco, Belize, Tuscany, Maui, and others. "While the loss of residences in our portfolio is extensive, our goal is to minimize the effect of this unfortunate circumstance on our Members to whatever extent possible," the club wrote to members.

What will happen to my Redemption Assurance Plan amount?

UE: The Redemption Assurance Plan will be administered as part of the bankruptcy process. It is premature to speculate at this point as to what will take place with the Redemption Assurance Plan.

DCN Commentary: Unfortunately for members, they are not at the top of the list for repayment. The next several weeks will be telling about what, if any, members will get refunded to them.

I am on the resignation list, will I be paid my redemption amount?

UE: You must file a claim in the bankruptcy with respect to any amount you believe that the Company owes you including any redemption amount due to a resignation. The claims process will be conducted as part of the bankruptcy and you may or may not receive any payments of your claim.

DCN Commentary: Like other members, time will tell regarding if any members will receive any of their refundable membership deposit refunded to them, but if Ultimate Escapes mirrors any of the other bankruptcy cases in the destination club industry, it would seem unlikely.

Is my Escape Planner still in place? May I make a reservation?

UE: The Company has retained a number of Escape Planners, though it was not possible for all of them to remain with the Company. You may make a reservation for travel as provided above, through October 19, 2010, subject to availability in the listed residences.

DCN Commentary: As a cost cutting measure, Ultimate Escapes closed their Fort Collins branch and laid off many of their travel planners. As mentioned by the club, members will be able to travel to select club residences until October 19, 2010.

What is going to happen to the Company?

UE: The Company in Bankruptcy continues to explore a number of strategic alternatives including the sale of its assets, a conversion to a member–owned Club, and other potential alternatives.

DCN Commentary: Ultimate Escapes is currently in advanced discussions with four potential buyers for the club who have all submitted letters of interest for some or all of the club's assets.

Ultimate Escapes CEO and President Jim Tousignant discussed the member owned option in a webcast for members, asking them to vote on such a proposal. The results of the vote showed that roughly two out of every three members were opposed to such a plan.

As Ultimate Escapes continues through the bankruptcy courts, more information about what will happen to the company will be revealed.

How can I get more information?

UE: Information can be found at BMC. The Company will be posting information on its public website as well. You may submit bankruptcy-related questions to bankruptcy@ultimateescapes.com. You may also call Member Services, however, Member Services Personnel will not be able to answer legal questions or provide legal advice. Your legal representatives are urged to speak with the Company's general counsel, who will direct your questions to outside counsel if appropriate.

DCN Commentary: Information is continuing to emerge with nearly every passing day. We have focused nearly all of our recent coverage on this industry shifting news, so please check our recent editorials for more information and check back frequently to learn up to the minute information about the state of the Ultimate Escapes bankruptcy.