The newly-bankrupt Spanish Trail Country Club in Las Vegas says it anticipates generating enough cash to pay operating expenses while its bankruptcy case proceeds.
A hearing is set for Monday in U.S. Bankruptcy Court for Nevada on the club’s routine "first day" motions seeking approval to continue paying its 53 employees, utility bills and other operating expenses.
With such approvals, the club and its 27-hole golf course can remain open and honor tee times as well as clubhouse event reservations.
The elite club filed for Chapter 11 bankruptcy reorganization on Wednesday to block a takeover by lender Hermitage Management LLC, which says it’s owed $16.1 million and had initiated foreclosure proceedings after Spanish Trail stopped making payments on its mortgage in August 2010.
In a court declaration Thursday, Farhang Rohani, the club’s general manager and chief operating officer, said the nonprofit company has some $124,000 cash on hand – which is now subject to control of the court.
Use of that money, as well as revenue received after the bankruptcy, is crucial to Spanish Trail achieving an "effective and orderly reorganization," of its business, he said.
The 27-hole Robert Trent Jones Jr. golf course is the club’s most valuable asset and, "due to its fragility and perishability, requires extraordinary efforts by skilled technicians on a daily basis for its preservation," the declaration said.
"Debtor asserts that the continued management of the club, and the golf course, in particular, protects lender's interests, and serves to mitigate the risk of diminution in value that could result in a few days' time if the golf course were to be left unattended," Rohani’s declaration said.
The club hasn’t yet disclosed how it intends to reorganize and Hermitage Management hasn’t indicated if it will cooperate with a reorganization or if it will ask the bankruptcy court for permission to proceed with the foreclosure.
In his declaration, Rohani explained why the club is in default on a $15 million loan the club took out in April 2007 to improve the golf course and clubhouse. Records show the loan was at 6.52 percent interest and required monthly payments of about $136,000.
"When planning for the renovation, debtor's projections were premised upon a strong economic climate. In connection with the general decline of the Las Vegas economy as a result of the global recession, the golf course industry in Las Vegas suffered from reduced play and dramatic membership attrition," his filing said. "Specifically, since 2008, to account for reduced play at public courses and membership attrition at private courses, revenue among Las Vegas' approximately 45 golf courses is estimated to be down 25 to 30 percent."
The club has seen membership decline from about 700 members to about 400 members because of the recession as well as increases in dues, Spanish Trail has said.
Not including debt service obligations, the club’s revenue during the first seven months of 2011 exceeded operating expenses by more than $355,000, Thursday’s court declaration said.
The club projects revenue will exceed operating expenses by another $176,000 through the end of the year, the filing said.