An Ultimate Bankruptcy Without Escape

The New York Times Deal Book section has reported that while Ultimate Escapes, a provider of luxury travel services, undergoes bankruptcy, it's members will not lose their status as the company's membership list, intellectual property and 11 of its properties have been approved for sale by a federal judge to the Demeure company for $14.5 million in cash. 

Demeure, a similar business in travel services, has also chosen to lease an additional 45 Ultimate Escapes' homes, with an option to purchase.

Ultimate Escapes filed for bankruptcy when they had defaulted on a $90 million loan. In an effort to keep the company's main business running, the deal comes at the end of a month's sales process.  A few properties were sold and an auction process began in the hopes of avoiding a fire sale.

Demeure made more than a "stalking-horse" bid set by Capital Source Finance, Ultimate Escapes' primary lender.  Capital Source's offer would have converted its claims into equity.

Peter Schwartz, Demeure's chairman and chief executive officer said, "Our goal is to move the membership and portfolio to a safe and secure financial footing as soon as possible."

Sixty-seven percent of Ultimate Escape's 1247 membership base have to accept the deal from Demeure for it to be granted.  The company is currently soliciting member's votes to satisfy the deal by November 5.

Sheon Karol, the chief restructuring officer for Ultimate Escapes, told reporters, "I believe that this is a good result for all constituencies, particularly for members and employees."

Ultimate Escapes was founded by former Morgan Stanley executive, Roger Tousignant, after the September 11, 2001 terrorist attacks. In setting its sights on the high-end travel market, the company offered its members time-shares throughout Europe as well as North and South America. Members also could enjoy luxury concierge services, local hosts and, in some cases, travel in private jets.

The minimum cost to become a Premiere Club member was $70,000 with an additional $8,000 in annual dues, while the maximum cost to become an Elite Club member was $200,000 to start and $16,000 due annually.

Originally, in its growth period, Ultimate Express purchased up other properties. Then when the recession struck, they were hit as hard as their competitors that were already filing for bankruptcies.

Mr. Karol's firm, CRG Partners, was hired by Ultimate Escapes in August as a restructuring advisor.  

Ultimate Escapes had already defaulted on a $90 million loan when it filed for bankruptcy last month. They have reported $222 million in debt with only $189 million in assets. The largest unsecured creditor, and still shown as one of the "destinations" on the Ultimate Escape website, is Trump International Hotel and Tower. 

Mr. Karol said that many of the company's 92 properties and 27 leases will be sold off in the bankruptcy in an effort to avoid an entire wholesale liquidation.

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