Montana’s Yellowstone Club, a mountain retreat for SUPER-RICH, files for bankruptcy

http://www.nytimes.com/2008/11/30/us/30gated.html?_r=1&hp

Big Sky Journal

Economy Crashes the Gates at a Club for the Rich


Janie Osborne for The New York Times
The Yellowstone Club has been affected by the global financial crisis

By KIRK JOHNSON
Published: November 29, 2008

BIG SKY, Mont. — Every town has its walls and gates — some visible, some not — for keeping things out or in.

Here some of the gates are world famous. The Yellowstone Club, a cloistered and cosseted mountain retreat for the super-rich, helped define a style and an era with its creation in 1999.

The club had 340 members with a private ski mountain only a schuss away from $20 million vacation homes. It was the corner office and the executive suite of gated communities all in one — an exemplar of exclusivity.

But the sense of refuge was an illusion. The global financial crises have stormed even these gilded confines: This month, the Yellowstone Club filed for bankruptcy protection.

“The economy caught up with them,” said L. C. Sammons, a retired physician from Memphis who lives in Big Sky just down the road from the club.

Other corners of the resort-economy West are taking punches. The Tamarack Resort in Idaho, which opened in 2004 north of Boise, is operating in receivership after the owners defaulted on a $250 million loan. Home construction has halted but the ski area is scheduled to open on Dec. 12. In Utah, the Promontory Club, a 7,224-acre ski and golf development near Park City, declared bankruptcy in March when the company defaulted on a $275 million loan.

Here in Big Sky, the Yellowstone Club’s troubles have been complicated by domestic entanglement. Tim Blixseth, the club’s founder, and his wife, Edra, divorced this year, putting the club in her control. Ms. Blixseth then filed for Chapter 11 bankruptcy protection, citing the club’s inability to restructure $399 million in debt.

“The freeze on the credit market put them in a bad place,” said Bill Keegan, a spokesman for the club. “They need to restructure their debt, and they realized it wouldn’t happen for the opening.”

To open for the season, Ms. Blixseth asked for an expedited hearing to raise cash, and Judge Ralph B. Kirscher of United States Bankruptcy Court signed an order in mid-November allowing Credit Suisse to lend the club $4.5 million to pay its debtors.

Montana has a history as a sometimes brutal exurb of capitalism, with tensions between rich and poor and labor and capital a theme since the 1800s. Over the last decade, people with Yellowstone Club-size wallets bought vast swaths of land, spurring the leisure economy at the same time that wage stagnation — Montana sank to 39th in the nation in median family income, according to the most recent Census figures — took hold of much of the rest of the state’s population.

Some residents, in interviews here and in Bozeman, an hour north of Big Sky, said they were not particularly upset about the club’s plight, given its excesses and presumptions.

But most people also know someone whose fortunes are tied to the financial engines that made this corner of Montana’s economy go in recent years — wealth, vacation housing and tourism.

“It’s kind of like a double-edged sword for a lot of people around here,” said Greg Thomas, a 31-year-old construction worker from Bozeman. “It’s pretty grotesque and ridiculous, but at the same time, a lot of people depend on going up there for jobs.”

Bill Hopkins was more to the point.

“I can kind of gloat on one hand, but I’m not really happy about it,” said Mr. Hopkins, 51, who works at Yellowstone National Park, just south of here, coordinating volunteer trail maintenance crews. Mr. Hopkins said he disliked the club’s environmental footprint — 13,500 acres of formerly pristine open-space backcountry, now sealed off and built on.

“The damage has been done, as far as development there,” he said, “so as long as it’s developed, I’d just as soon see it operational.”

The reaction to the club’s problems in Big Sky, population 2,500, has been filtered through an economic slowdown that was already well under way.

Mark Robin, owner of the Hungry Moose Deli, said the river of headlights that used to greet him at 6 a.m. each day when he opened the shop — cars and trucks full of construction and maintenance-crew commuters driving down from Bozeman, eager for coffee and breakfast — had already slowed to a trickle as housing construction slumped outside the club.

And the credit crisis had already struck home as well, at a Big Sky ski resort open to the public called Moonlight Basin, which received its financing from Lehman Brothers before it collapsed. Moonlight laid off much of its workforce this fall, then renegotiated its debt, rehired its workers and is planning to open for the season in December.

Residents of Big Sky say everybody knows how hard the day-to-day struggle can be in rural Montana. Scrambling and getting by is just part of the landscape in a seasonal economy, said Marne Hayes, the executive director of the Big Sky Chamber of Commerce.

“People work really hard to stay here, and it’s not always an easy thing to do,” said Ms. Hayes, who came here from Pennsylvania in the early 1990s and took odd jobs for years to make ends meet. As for economic cycles, she added, “people who live and work here never thought they were immune.”

Some of the Yellowstone Club’s members, who paid $18,000 in annual dues for years, on top of their $250,000 deposit to join, are not quite so understanding. About 120 of them filed a brief in bankruptcy court asking what became of all the fat checks.

“That money seems to be gone,” the brief states, “and members want to know why.”