|By Josh McCann, The Island Packet, Hilton
Head Island, S.C.McClatchy-Tribune Regional News
Dec. 31, 2009--A bankruptcy court judge approved the sale of substantially all assets of the bankrupt Daufuskie Island Resort & Breathe Spa to a North Carolina company for $49.5 million at a hearing Wednesday in Beaufort.
Montauk Resorts' offer was the highest to emerge after a trustee in charge of the estate marketed the property for months.
Judge John E. Waites said he feared that if he did not approve Montauk's offer, the resort might be broken up and sold piecemeal, resulting in little benefit to creditors or the community of the sparsely developed, 5,000-acre island that is accessible only by boat.
"Frankly, this is what the case is about: Finding some value," Waites said. "This sale had to be seriously considered and will be approved today."
The resort includes an inn, two golf courses, tennis courts, several restaurants, an equestrian center and entitlements to develop more than 500 commercial and residential parcels. Owners Gayle and Bill Dixon declared bankruptcy nearly a year ago.
Much of Wednesday's three-hour hearing in the Beaufort Federal Courthouse focused on arguments between attorneys representing trustee Robert C. Onorato, who proposed the sale, and attorneys representing The Melrose Club, a predecessor to the resort.
The club's attorneys opposed the sale of the resort free of encumbrances because its members contended such a sale would infringe on rights they secured in an agreement with a previous purchaser in 1996.
Although Waites acknowledged the club's interests in that agreement, he said it should not block a sale that he deemed in the best interest of the island and its economy.
Montauk has indicated it would not go through with the deal if the resort's title remained encumbered by that agreement, Waites said.
Attorneys for several secured creditors and a committee of unsecured creditors supported the sale.
The trustee believes the company will close the sale on or before Jan.15, said Rick Mendoza, an attorney for Onorato.
Should the trustee remain in control of the resort after that date, he would probably exhaust money loaned to the estate to keep the resort operating during the bankruptcy, Mendoza said. Shutting down the assets and stopping basic maintenance would cause potentially irreversible damage to the property and harm the interests of all involved, he said.
By contrast, Montauk plans substantial capital improvements and a beach renourishment, Mendoza said.
Waites closed by urging the parties to cooperate.
"The court is always concerned about the community and Daufuskie Island," Waites said. "You all live together, and you're going to live together, so you need to figure out a way you can work together for the betterment of your community."
Onorato said after the hearing he plans to continue working with The Melrose Club and Montauk to bring the dispute that has riled the island to a "harmonious" end.
It's not yet clear how the proceeds of the sale will be distributed among parties that have submitted about $90 million in claims, but Onorato said he believes the results will satisfy many.
"By getting what we got, I think everybody should come to the table and walk away with a chunk of change that will at least make them happy," he said.
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Copyright (c) 2009, The Island Packet, Hilton Head Island, S.C.
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