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Northern Michigan resort pursues reorganization in Chapter 11

Last week our Wayne County bankruptcy law blog looked at a major filing by Trump Entertainment Resorts. The company sought Chapter 11 protection, although there was some concern over whether the judge might convert the filing to Chapter 7 given challenges involving the repayment plan. If this seemed somewhat far removed from Michigan, let's look this week at a commercial bankruptcy case closer to home.

Back in 2002, a number of high-profile investors including former CEOs of Ford and Daimler Chrysler paid over $25 million to purchase the Treetops Resort and Spa in northern Michigan. The renowned golf and ski destination also includes a hotel, restaurants and other facilities. It's won an award from Golf Magazine and placed on Golf Digest's list of top resorts in the country. And as of late November, its' parent company is attempting a business reorganization under Chapter 11.

While the company owes $7 million in debt and cannot make the interest or principal payments -- not to mention back property taxes it owes -- there's reason to believe that it can return to profitability. The economic crisis hurt its business, but since 2010 its gross revenue is up over 70 percent. It's paid over $1 million toward back taxes and put some of its real estate up on the market. It has also sought to reduce what it owes by swapping debt for equity in the company.

One important element of the Treetops filing is debtor in possession financing. This is what its' owners hope will prevent any inclement weather from proving disastrous. We'll take a look in a follow-up post at this element of a Chapter 11 bankruptcy case.

Source: The Detroit News, "Treetops Resort seeking bankruptcy reorganization," David Shepardson and Robert Snell, Nov. 27, 2014

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