Bankruptcy judge rejects late $199 million bid for Georgia’s Sea Island Co.

Bankruptcy judge rejects late bid for Sea Island

BRUNSWICK, Ga. — A U.S. Bankruptcy Court judge rejected a late bid of about $199 million for the resort company Sea Island, which entered bankruptcy protection last month.

Sea Island already had agreed to sell its golf courses, hotels, spa, beach club and other resort properties for $197.5 million to a joint venture managed by Oaktree Capital Management LP of Los Angeles and Avenue Capital Group of New York.

That bid beat out an offer from Starwood Capital Group and KSL Recreation, but Starwood made a new offer after Sea Island filed for Chapter 11 protection on Aug. 10.

Judge John Dalis on Thursday said it would be inappropriate to let Starwood come in with a late bid, and that it would have to wait until an Oct. 11 auction to act again.

Sea Island, a 2-by-5 mile stretch of private beaches and ancient oaks 80 miles south of Savannah, got its start as an exclusive getaway in 1928 when Alfred “Bill” Jones Sr., opened the Cloister resort with his partner, Howard Coffin. The Joneses took over the business after Coffin committed suicide in 1937.

Under the Jones family, Sea Island has maintained a rugged veneer with thick stands of ancient oaks and roaming alligators while marketing itself as secluded vacation escape for the wealthy.

But exclusive clubs are struggling nationwide, with members dropping memberships in hard times.

In 2009, about 140 of the 16,000 golf facilities in the country closed and 50 opened, according to the National Golf Foundation, which represents 4,000 courses nationwide. The industry has lost 100 clubs a year for the past four years.

According to court filings, Sea Island Company hopes to emerge from bankruptcy protection by selling four resorts, three golf courses and two private clubs.

But opponents say the deal favors lenders.

Former Sea Island president Dennie McCrary, who is owed about $27 million, and other unsecured creditors supported Starwood’s late bid. They were joined by about 25 Sea Island club members.

Lawyers for the two groups said the higher sale price would help ensure that unsecured creditors like McCrary are paid what they are owed, and club members’ rights are protected.

“The unsecured creditors claims are being left behind. Our intention is to level the playing field, which in their view is skewed greatly to the lenders,” said Jordi Gusco, who represents the committee of unsecured creditors.

Sea Island Co. was the only party that wanted to disallow Starwood’s bid. Sarah Borders, a Sea Island lawyer, told Dalis that setting aside the agreement with Oaktree-Avenue would harm the company’s employees and all of its 16,000 creditors.