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Sea Island Creditors Approve Bankruptcy Plan, Former Executives
Working Toward Resolution of Compensation Objection

By Nevin Batiwalla, The Brunswick News, Ga.McClatchy-Tribune Regional News

Nov. 03, 2010--Sea Island Co. creditors have overwhelming approved the distressed resort operator's plan to emerge from bankruptcy and be sold to a partnership of investment firms.

The plan received nearly 99 percent support, according to a tabulation of ballots filed Tuesday in U.S. Bankruptcy Court. Only 20 votes were cast to reject the plan, compared to more than 1,300 votes to accept it.

Sea Island Co., Glynn County's largest private employer, was auctioned Oct. 11 to a partnership of four firms that agreed to pay $212.4 million for substantially all of its assets, including two Forbes Five-Star resort hotels, a luxury spa and four top-tier golf courses.

The four buyers are Oaktree Capital Management of Los Angeles, Avenue Capital Group of New York City, Starwood Capital Group of Greenwich, Conn., and Anschutz Corp. of Los Angeles.

To become effective, the sale and bankruptcy plan must next be approved by Bankruptcy Judge John S. Dalis after a hearing Thursday at Brunswick.

The confirmation of the plan won't settle an objection by six former executives who said they are not treated fairly in it. The executives and Sea Island Co. have agreed to try to resolve that disagreement after the plan is presumably approved.

The objection centers on $25 million in deferred compensation owed to the men. The claims by Billy Gibson, Dennie McCrary, Robert Flight, Matt Hodgdon, David Everett and William C. Smith arose from the luxury resort operator's long-standing deferred compensation program involving stock appreciation rights designed to attract and retain key executives.

Among the six, a breakdown of individual ballot does not show Hodgdon voting, but shows the other five voting to approve the plan.

Although Sea Island Co. in the past has declared the deferred compensation as debt to the Internal Revenue Service, it contended in bankruptcy filings that it is "shadow equity," or an interest in the value of the company.

The former executives disagreed and said reclassifying the debt as equity will prevent them from recovering any of it.

Sea Island Co.'s financial trouble began after it took on too much debt after it spent heavily to rebuild The Cloister, its flagship resort on Sea Island, and shifted its target market from well-off Southerners to the global ultra-rich.

The company presumed that real estate sales would offset operating losses at its resorts, but that plan failed in the meltdown of the national real estate market and downturn in financial markets.

All Sea Island Co. employees, including executives, will be offered continued employment and benefits by the buyer. However, the purchaser is not prohibited from terminating any employee after it assumes ownership.


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