Club counters receivership motion, claims $26 million loan in escrow
NEWFANE- The Hermitage Club has filed an objection to a Berkshire Bank emergency motion asking the court to appoint a receiver for properties in foreclosure, claiming they have a lender who intends to lend $26 million to the beleaguered company to repay its delinquent debts.
Berkshire Bank filed for foreclosure on Hermitage properties in Wilmington and Dover on February 23 for failure to pay on three loans totaling $17.1 million. According to the complaint, the Hermitage owed $16,599,579 in principal, interest, and late charges on the loans. The foreclosure included the Hermitage Inn, Haystack Ski Area, Hermitage Clubhouse, Haystack Golf Course, Chamonix townhouse village, the Snow Goose Inn, the Horizon Inn, and the Doveberry Inn, and numerous smaller properties.
On Monday April 16, Berkshire Bank attorney Elizabeth A. Glynn filed an emergency motion for appointment of receiver to “manage and preserve” the property during the foreclosure proceedings. Glynn also said that the Hermitage is “no longer a going concern, able to pay its bills as they come due,” noting that Hermitage operations have been shut down by the Vermont Department of Taxes.
In the objection filed April 27, Hermitage Club attorney Bob Fisher told the court that receivership is unnecessary at this time. “(The Hermitage Club), in their effort to satisfy the financial obligations owed to the plaintiff, Berkshire Bank, have secured a signed terms sheet providing for a financial closing no later than May 15, by which the plaintiff will be paid.”
Included with the objection was a heavily redacted, four-page, loan term sheet and an affidavit signed by Hermitage Club Interim CEO Robert Rubin and founder James Barnes. Fisher said the term sheet was redacted to preserve confidentiality under the agreement. “Because there’s a deal in process, redacting seemed prudent,” Fisher said. “But I have an unredacted copy in my possession.”
According to the term sheet, the agreement is a “non-binding” outline on which the redacted lender and the Hermitage can base negotiations for the $26 million loan. Under the terms, a finance company would be formed using $26 million currently held in escrow in a Wells Fargo account. The finance company would pay off Berkshire Bank’s mortgage, and take on a first mortgage “on all assets associated with the (Hermitage Inn Real Estate Holding Company’s) business and membership ski and golf club known as the Hermitage Club.”
According to the agreement, the assets under the first mortgage would include “all, each, and every manner of real estate, real property, development rights, contract rights, permitting rights, permits and approvals, and intellectual property of the company of every manner and type.”
The document calls for a closing “on or before” May 2, and also includes a provision for a “bridge payment” of $220,000 to be paid to the Hermitage no later than Monday, April 30. “If the payment is not received by April 30, then this agreement is considered null and void.”
Fisher and Hermitage Club officials declined to discuss whether the bridge payment had been made and the agreement was still active. Fisher noted he hopes to have a more formal agreement from his clients to present to the court at a hearing on the matter on Thursday, May 10.
According to the affidavit signed by Rubin and Barnes, a receiver is not needed to manage or maintain the property or the business. “The buildings and assets of the Hermitage Club are receiving full security tours with daily checkpoints that are conducted by local employees that are part of a team and reviewed by Interim President Robert M. Rubin. Every property has been fully secured and cleaned, and is not at risk from elements or other.”
The affidavit also notes that Hermitage Club Chief Restructuring Officer Patricia Reinhardt is still working to “protect and oversee” finances. And at the Hermitage Golf Course, “employees are also protecting and readying the golf course including removing the freeze tarps on the greens to protect this valuable asset.” A photo of the freeze tarps being removed was posted on a Hermitage Golf Course Facebook page this week.
Rubin and Barnes also suggest that experienced local employees, rather than an outside receiver, are better able to protect the club’s assets. “The club is maintaining its essential employees on staff in order to maintain the club’s assets and commence on the matters set forth in this affidavit.”
Under an order from the Vermont Department of Taxes, however, the Hermitage Club is not authorized to collect income withholding, suggesting that they’re not allowed to have paid employees. The March 27 order signed by Vermont Department of Taxes Assistant Attorney General Elizabeth Hannon said the Hermitage is not allowed to conduct any business, to include “paying employees, including security, day care, and maintenance personnel.”
Fisher said he has already fielded a call from the tax department inquiring about the statements in the affidavit regarding employee activity. “I told (the tax department) there is a skeleton crew, a handful of folks, only to secure the property,” Fisher said. “It’s just to avoid the property going to waste, preserve the asset. If the freeze tarps aren’t removed the greens will be damaged. They (the tax department) sounded satisfied, but I don’t know if we’re going to see something from them.”