|By Teresa Stepzinski, Terry Dickson, The
Florida Times-Union, JacksonvilleMcClatchy-Tribune Regional News
Aug. 11, 2010 - --ST. SIMONS ISLAND -- Uncertainty has given
way to guarded optimism the day after Sea Island Company declared
bankruptcy. In its filing for Chapter 11 protection from its creditors
in U.S. Bankruptcy Court, Sea Island has agreed to sell its golf
courses, hotels, spa, beach club and other resort properties for $197.5
million because it cannot repay the $482 million it owes.
Bill Jones III, the third generation head of the family-owned
company, met with employees and club members Wednesday to explain what
was done and how he expects things to play out. Employees declined to
reveal what was said, but spokesman Michael Geczi said prospective
buyer Sea Island Acquisition LP will keep all employees in their
current positions. Jones will continue as chairman and chief executive
officer and David Bansmer will remain as president and chief operating
Sea Island Acquisition will also continue club memberships
that are necessary to keep the golf clubs and resort properties viable,
Geczi said. If no other buyer outbids Sea Island Acquisition in an
auction, the new company should emerge from bankruptcy in November, he
Geczi said there will likely be some news in coming days that
will sound bad to the uninformed. "Employees in a few days will receive
a warn notice,'' he said. The federally required notices will inform
the 1,400 employees that their jobs will be terminated in about 60
days, but they will be quickly rehired by the new owners, he said. "One
minute all these employees will be terminated and simultaneously hired
by the new company,'' he said. "Everyone will be offered their jobs in
essentially the same circumstances as now.''
The new owners, who are principals in Oaktree Capital
Management of Los Angeles and Avenue Capital Group of New York, are
familiar with Sea Island's traditions and reputation for service and
want that to continue, Geczi said. "These owners recognize the value of
these clubs is the membership and the employees,'' he said.
Some in the close-knit business community of adjacent Sea
Island and St. Simons Island were hoping a bright future is on the
horizon for the company. "As a company and individual, I certainly pray
and wish the best for the Jones family. But I also welcome the new
owners as part of the Sea Island family," said Vicki Palonen, president
of Its All About You, which does all of the monogramming work for the
company. Palonen has relied on the company and it has relied on her for
22 years. She doesn't see that changing. "All the speculation about the
bankruptcy added a lot of anxiety and uncertainty. But now, that's all
behind us and I think everything will calm down. I feel like this will
be a good thing for them and everyone."
There is more to the bankruptcy filing, however, than Sea
Island selling off assets so its creditors can get a small portion of
their money back. The bankruptcy filing includes a list of the top 30
unsecured creditors, 19 of whom have claims under employments
Topping the list is Dennie McCrary, a former company president
and Sea Island resident, who is owed more than $27 million. Also on the
list is David Everett, who is owed $3.6 million. He was in charge when
the company got so deeply in debt. It was during his tenure that the
company payroll jumped from $35 million to $85 million and the number
of employees more than doubled to 2,500.
Among others claiming employment obligations are Matt Hodgdon,
former chief financial officer now the Georgia Aquarium, who is owed
$3.5 million. Some of the employees are owed deferred compensation
meaning they deducted money from their pay each month and invested it
in the company. Taxes were deferred on that pay until the employees
retired and took the money out.
The Pension Benefit Guarantee Corp.'s Department of Insurance
Supervision and Compliance has a claim of $13 million. The federal
agency insures and oversees defined benefit pension plan like Sea
Island's. Ceczi said the plan is totally funded and everyone is
The Pension Benefit Guarantee Corp. disagrees. "There is a
shortfall in the pension plan,'' agency spokesman Jeffrey Spicher said.
"That's not to say the company is behind on its contributions, but if
the pan were to terminate today, there would be a shortfall.''
Spicher also said there is nothing to indicate the pension
plan will be terminated by the new owners. In a release announcing the
bankruptcy, the company said all club members will be allowed to enjoy
the same benefits and services at the respective golf and other clubs
and receive full credit for membership deposits. That could be good
news for real estate agents. Houses on the market that had Sea Island
memberships have been sitting unsold for more than a year because of
doubts the memberships would be honored and transfer to new owners.
"The memberships will become valuable again and enhance the value of
the property,'' said Gene Hoaster, a St. Simons real estate agent.
Sea Island also provided happy memories for vacationers and
others with an atmosphere that catered to families. Anne Marlboro of
Atlanta said her parents honeymooned at the Cloister. Although she has
never stayed there, she was window shopping at the Cloister Collection,
one of the boutiques at the Shops of Sea Island shopping center near
the causeway to Sea Island. "Mom and Dad loved it there. I hope they
can keep it the way it was because you don't find many places with that
same old time elegance," Marlboro said.
It was an upgrade of the elegance that got the company in
trouble as it built the Lodge at Sea Island on St. Simons and tore down
and rebuilt the Cloister, its Beach Club and spa. It greatly reduced
the number of rooms and more than doubled rates. For a time, the
company was relying on its real estate sales to prop up its resort
business, which was losing $80 million a year. When the real estate
markets crashed, Sea Island couldn't come anywhere near meeting it
obligations and defaulted on loans approaching $300 million on Jan. 10,
2009. Three months later, the company restructured its loans but still
didn't make payments.
More than a few Sea Island guests and employees routinely eat
at Brogen's North, also near the island causeway. Rene Reyes,
restaurant manager, doesn't expect the ownership change to impact their
business much. "If everything stays the same, we should be fine and
will ride out the rest of this recession storm OK. But if they start
cutting jobs, we could be in trouble," Reyes said.
Glynn County school system officials are keeping a close eye
on the bankruptcy. Assistant Superintendent Andrea Preston, who
oversees district finances, expects the school system will lose an as
yet undetermined amount of property tax revenue. "The sale price is
less than the property value on the tax digest, and that means we will
receive less property tax revenue next year," Preston said. Still, Sea
Island is hosting an event in October that should bring some money to
The PGA Tour's inaugural McGladrey Classic will be played on Sea Island's Seaside Course Oct. 7-10 on the south end of St. Simons Island. Famed golf course designer Tom Fazio updated Seaside in 1999 to mimic a spectacular Scottish links course. Fazio is listed among the unsecured creditors. His claim is for $850,000.
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