Florida-based Celebrity Resorts, which in 2008 bought David Walley's Hot Springs Resort and Spa south of Genoa, has filed for Chapter 11 bankruptcy protection under the weight of $27.8 million in debt.
According to documents filed March 8 in federal bankruptcy court in Orlando, Celebrity Resorts and its 35 affiliates, together overseeing 13 resorts nationwide, cited the economy as grounds for the filing.
"Over the past two years, the real estate markets in both the United States and Florida have suffered and continue to suffer losses and decreased capital markets unseen in this country since the late 1920s," the documents state. "As a result, consumers have drastically decreased their discretionary spending on luxury items, including vacations. This trend has been so marked as to give rise to a new term- the 'staycation,' or stay-at-home vacation."
Court documents also reveal that Celebrity CEO Jared Meyers was in a legal dispute with his father, Neil Meyers, and brother Steve Meyers.
"This conduct ultimately led to the termination of N. Meyers and S. Meyers," the filing reads.
According to documents, a lawsuit ensued and "N. Meyers began to take actions which ultimately helped push the debtors into having to seek relief through bankruptcy."
"In addition, there were problems within the relationship between the debtors and Textron Financial Corp., and in February 2010, Textron declared a default on debtor's loan obligation," the documents state.
According to the filing, Celebrity's profits in 2009 increased by about $5.8 million over 2008.
"This 2009 profit reduced the overall debt, including affiliated debts, from $37.5 million to $27.8 million, but did not improve the debtors' cash flow."
The company stated that their drop in business, due to the economy, was compounded by existing owners defaulting on payments.
"As a consequence, certain debtors and their affiliates defaulted on several loan obligations, with at least three of the secured lenders threatening to commence legal proceedings," the documents state.
The company's annual gross revenue for 2009 was approximately $40.3 million, according to the filing. The list of secured lenders, owed roughly $23 million total, includes Resort Funding, LLC, which is owed $1.7 million and has the "Carson Valley restaurant" as collateral.
In the filing, the company estimated the book value of its real and personal property around $25.1 million.
"As of the petition date, the debtors have approximately 384 employees," the documents read. "The total pre-petition compensation wages owed as of the petition date are approximately $424,750 not including taxes."
