Ultimate Escapes Files For Bankruptcy

By: Destination Club News
Date: September 20, 2010

In a move expected by destination club industry insiders and many of their members, Ultimate Escapes has filed for bankruptcy protection in US Bankruptcy Court in Wilmington, Delaware. The world's second largest destination club in terms of members and the largest in terms of total destinations estimates between 1,000 and 5,000 creditors, between $10 million and $50 million in assets, and a staggering $100 million to $500 million in estimated liabilities.

According to the bankruptcy filing, notable unsecured creditors include Trump International Hotel & Tower owed nearly $500,000, multiple legal service fees and settlements, and several resorts that were available to members. The club's Board of Directors authorized the Chapter 11 petition following the recommendation of a Special Committee of UEI's independent directors "in order to protect UEI's assets with a goal to maximize the value for all of its constituencies, including its creditors, its members and potentially its shareholders."

"We are in crisis," said Ultimate Escapes President and Chief Executive Officer Jim Tousignant in a webinar earlier this month. "The club finds itself with very little cash and operating under a forbearance agreement with our primary secured lender CapitalSource, as a result of being in default of our loan agreement. CapitalSource is currently providing the club with a very limited funding and time to restructure and recapitalize our business, either on a standalone basis or as part of a merger with another club or merger with a real estate firm or hospitality company, or through a sale of the club's assets to an acquirer. As no such plan has yet to materialize, it is now increasingly likely that any of these options will be done in a process under bankruptcy protection."

Tousignant's thoughts have now proven to be accurate as the club finds itself on the brink of total collapse. "The Company has petitioned the court to approve the appointment of CRG Partners, LLC to provide the services of a Chief Restructuring Officer and supporting personnel," the club wrote today in a letter to its members. "It is expected that the company, through its Chief Restructuring Officer, will be allowed to manage its business in the ordinary course. The company, in conjunction with its largest secured creditor, CapitalSource Bank, is actively continuing the process of exploring the sale of its operations to another destination club, hospitality company or investment group as well as other strategic alternatives, including potentially a conversion to a member-owned club."

Members voted on such a conversion earlier, overwhelmingly rejecting such a proposal by a two to one margin. As upcoming reservations were canceled and executives were unresponsive to questions by the members, loyalty sharply declined with many blaming the executive team for their lack of foresight. We have reached out to Sheon Karol to get his opinions on the bankruptcy and the future of Ultimate Escapes, including the role that Jim Tousignant, Richard Keith, and others will play moving forward. Multiple requests for more information have not been answered.

Several options still exist for the club, but if history is any indication, Tanner & Haley, High Country Club, Portofino, LUSSO Collection and other destination clubs that filed for bankruptcy were not able to weather such a storm.

The bankruptcy filing of Ultimate Escapes is far from the last chapter in this story. Check back frequently in the coming days and weeks to learn more about the fate of the Ultimate Escapes members, properties, and executive team.