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Retired Sea Island Executives Object to Bankruptcy Plan's Language;
At Stake is $25 million in Unsecured Deferred Compensation Claims

By Teresa Stepzinski, The Florida Times-Union, JacksonvilleMcClatchy-Tribune Regional News

Oct. 29, 2010--BRUNSWICK -- A half-dozen retired Sea Island Co. executives have objected to the company's bankruptcy plan, saying unless its language is clarified they won't be able to recoup one penny of the millions of dollars in deferred compensation owed them for their years of service.

Dennie McCrary, Billy Gibson, Robert E. Flight, Matt Hodgdon, David Everett and William C. Smith filed the objection Wednesday in U.S. Bankruptcy Court in Brunswick.

They hold unsecured retirement claims totaling more than $25 million against Sea Island stemming from the company's longtime deferred compensation program, which was designed to attract and retain top executives over the years. Those claims constitute debt owed to them, and Sea Island has declared the deferred compensation as debt to the Internal Revenue Service for many years, the objection states.

The bankruptcy plan automatically reclassifies the claims as equity in the company, which means the retired executives would not get to share in the pool of assets being set aside to pay secured and unsecured creditors, according to the objection.

Michael Geczi, a company spokesman, told the Times-Union that Sea Island has "reached an agreement with the objecting party which resolves their objection to the plan."

McCrary, former Sea Island president, and others in the group, however, said they were unaware of any such resolution. There were no documents in the bankruptcy court file as of 5:30 p.m. Thursday indicating the issue had been settled.

"We hope it is worked out ... I'm really disappointed that we had to object to this part of the plan," McCrary told the Times-Union.

"We'd like to be treated fairly ... and it's just not fair that our compensation would be treated as equity in the plan and not get anything for all those years of service," said McCrary, who declined further comment.

The group's lawyer, Rufus Dorsey IV, declined comment about a possible resolution.

In the objection, Dorsey said bankruptcy law doesn't allow the plan to automatically reclassify the debt as equity, nor is it an issue to be determined by the pending confirmation vote on the plan.

Rival bidders united Oct. 11 to negotiate a deal to jointly buy the financially crippled luxury resort and real estate company for $212.4 million. The sale, however, won't be final until approved by U.S. Bankruptcy Court Judge John Dalis.

Today is the final day for the creditors, who are divided into two groups -- secured and unsecured -- to vote on the bankruptcy plan.

Dalis is scheduled to decide Nov. 4 whether to approve the plan and finalize the sale. In a hearing beginning at 1 p.m., Dalis will take up objections and any other matters before ruling.

He has the final word. Dalis can approve the plan as long as at least one class of creditors has accepted it, and it is fair and equitable to the group of creditors that rejected it, the bankruptcy code states.

If Dalis approves, the new owners would be a partnership among investment firms Oaktree Capital Management of Los Angeles and Avenue Capital Group of New York, and partners Starwood Capital Group of Greenwich, Conn., and the Anschutz Corp. of Denver.

They would take ownership of Sea Island's four luxury resorts, three golf courses and two private clubs. The money would go to creditors who, although owed about $1.05 billion, would receive only pennies on the dollar to settle Sea Island's debt.

Sea Island owes about $566 million to secured creditors, primarily Synovus Financial Group, Bank of America and Bank of Scotland, a company disclosure statement showed.

It also owes $485.6 million to about 4,000 unsecured creditors ranging from retired company executives and other former employees to members of its Sea Island Club and Ocean Forest Golf Club, according to the disclosure.

teresa.stepzinski@jacksonville.com, (912) 264-0405

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Copyright (c) 2010, The Florida Times-Union, Jacksonville

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