|By Michael Welles Shapiro, The Island
Packet, Hilton Head Island, S.C.McClatchy-Tribune Regional News
January 22, 2009 --The owners of the struggling Daufuskie Island Resort & Breathe Spa filed for bankruptcy Tuesday, leaving uncertain the fate of one of the island's largest employers and a list of more than 400 creditors.
The filing follows layoffs of more than 100 resort employees at the end of last year.
"The resort is a huge contributor to our economy," said Cathy Tillman, who writes the Front Porch, a Daufuskie newsletter. "But we have been through this before, and we weathered it," she said, referring to 2002 when the resort's previous owner was forced to sell because of bad economic conditions.
In a news release, an official at Daufuskie Island Properties LLC, which owns the resort, said the tumbling stock market and a lawsuit brought by a group of resort members led to the company filing for Chapter 11 bankruptcy. The company plans to try to reorganize and sell off parts of its business. It has not ruled out selling the entire resort, according to the release.
"Like so many others, we, too, have had to respond and react to the extreme fluctuations and confusion in the markets. We have had to lay off more employees than usual in our winter season, long-time employees that we care about, and that has been a difficult and emotional process," said Tim Foley, asset manager for Daufuskie Island Properties, which is owned by Gayle and Bill Dixon of San Francisco.
The filing shows that revenue at the resort dropped sharply from $27.5 million in 2007 to $17.3 million last year. The company lists $88.2 million in liabilities and $97.1 million in assets in the filing.
But Foley was optimistic that bankruptcy would allow the company to reorganize and to stay in business.
"We look to this as an opportunity to regroup and reset our strategy for the future success of our Daufuskie Island assets and to open our 2009 season in March as planned," Foley said.
Foley said in a phone interview Wednesday that bankruptcy proceedings also will allow the company to resolve the resort members' lawsuit faster.
The Dixons have said the suit, which prevents them from selling off assets, stands in the way of the resort's profitability.
Arguing that the sales are needed to turn the resort around, Gayle Dixon wrote on her Web site that the resort couldn't continue under its traditional management structure, where diverse pieces of the resort, including two golf courses, tennis courts, several restaurants, the Melrose Inn, and an equestrian center, were run by a single company.
"I have 23 years of data... that shows annual operating losses in the millions of dollars," she wrote. The Melrose Co. built the resort in 1980s, and the resort has changed hands numerous times, most recently when it was purchased by the Dixons in 2002.
Alexander Beard, an attorney for the resort members, has said they want a seat at the table during any sale discussions to ensure their privileges at the resort are not curtailed. Beard told The (Charleston) Post and Courier he could not comment about whether the litigation was a factor in the company's decision to seek bankruptcy protection.
Foley said a speedy resolution to the suit is best for both parties.
Russ Brown, chairman and CEO of RBC Enterprises, which develops and sells real estate for the resort company, said the sale of a major resort asset could allow the company to pay off its creditors.
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Copyright (c) 2009, The Island Packet, Hilton Head Island, S.C.
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