Business as usual at Moonlight
By Mike Coil
Photo by Mike Coil
On Friday, September 11th Lehman Commercial Paper, Inc. filed a foreclosure action in the Madison County District Court against Moonlight Basin Ranch and numerous subsidiaries. Also named in the suit is Lee Poole who allegedly guaranteed the loan from Lehman to Moonlight. The suit also names various local businesses that hold liens against Moonlight for unpaid labor and supplies. Outstanding liens allegedly total about $500,000. There are a total of 31 defendants named in the complaint. The complaint is 40 pages in length and contains 469 pages of exhibits comprised of the dense legal documents which constitute the loan agreement between Moonlight and Lehman.
The start of the foreclosure was anticipated by Moonlight management who issued a letter in late July, 2009 wherein they stated that Lehman had advised them that they intended to start foreclosure proceedings against Moonlight. “We knew it was coming, said Greg Pack, General Manager, of Moonlight Basin. “We’re still hiring employees, doing projects, and still operating the golf course. Lehman has made it clear to us that they intend to operate and have filed the paperwork as a formality.”
Moonlight opened for business in 2003 and developed a significant number of resort amenities including the ski lifts and terrain and a substantial housing core and supporting infrastructure. Moonlight has been known for its quality service and modern, breathtaking lodges and vistas. Its planned 18 hole golf course remains unfinished and it is unclear if work will continue on the same.
In the court filing Lehman has alleged that Moonlight owes $89,664,320.77 in principal and accrued interest. Interest is allegedly accumulating at the rate of $29,710.30 per day. Lehman alleges that it is entitled to $500,000 in legal fees plus an additional amount which may accumulate during the proceedings.
One of the exhibits attached to the complaint appears to be a personal guaranty signed by Lee Poole, the CEO and principal owner of many of the Moonlight subsidiaries. Lehman has alleged that “the property described in the Mortgages is likely insufficient to discharge the entire mortgage debt” and will presumably look to Poole for any shortfall under the terms of his guaranty. Typically a judicial foreclosure is undertaken when the lender feels that the sale of the mortgaged property will not cover the debt. As part of the proceeding the lender seeks a deficiency judgment so it can attempt to liquidate other assets pledged by the borrower. In this case Lehman is seeking a deficiency judgment. No comment from Poole about the case was available at press time.
Lehman has also asked the Court to appoint a receiver to operate the resort during the pendency of the case. They also seek to have all assets of the resort delivered to the receiver in order to control the same during the case. It is unclear who will be operating the resort in the near future as the ski season approaches.
Lehman and Moonlight were in negotiations for many months over the future of the Moonlight financing package. On June 19, 2009 the parties entered into a forbearance agreement wherein Lehman agreed not to pursue its remedies under the loan documents until July 19, 2009, at which time Moonlight was required to repay its loan. No repayment occurred. Moonlight has been unable to find other financing over the summer.
Lehman admits in their pleadings that there are various mortgages which are superior to their interest in the property. These mortgages generally run in favor of Bank One, Michigan. Although the amount due under the superior mortgages is stated as $260,000,000 some of them are at least 10 years old and may have been substantially reduced. The exact amount due under the superior mortgages is not stated in the Lehman filing. Any foreclosure by Lehman where they take title to the resort property would be subject to the prior mortgages.
Lehman has had its own troubles lately. It filed for bankruptcy in the fall of 2008. The original parties to the loan were Lehman Brothers Commercial Bank and Lehman Brothers, Inc. Lehman Commercial Paper, Inc., the named Plaintiff in the case, appears to be the successor in interest to the original parties.
Lehman is being represented by attorney Doug James of Billings, Montana and three lawyers from the law firm of Windels, Marx, Lane and Mittendorf of New York City. Moonlight has not yet appeared in the case and the identity of their counsel is unknown at this time.