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Rivals Unite and Form Coalition of Investors to
Purchase Sea Island for $212.4 million

By J. Scott Trubey, The Atlanta Journal-ConstitutionMcClatchy-Tribune Regional News

Oct. 12, 2010--The two competing investor groups looking to buy Georgia's iconic Sea Island resort spent most of Monday battling each other in a bankruptcy auction before coming together on a joint bid to buy the tony coastal retreat.

At nearly 10 p.m., Monday, a coalition of Oaktree Capital Management, Avenue Capital Group, Starwood Capital and Anschutz Corp. announced a joint bid to acquire the beleaguered Sea Island Co.-- including its luxurious Cloister and Lodge hotels and four golf courses -- for $212.4 million.

After locking horns for more than six hours, the two competing groups pooled their resources in a joint bid that was nearly $15 million more than that offered by Oaktree and Avenue in August. The new deal has the blessing of Sea Island's secured creditors and the unsecured creditors' committee.

The deal is not yet final, however. Sea Island's creditors will meet Oct. 29 to approve the sale, which must also pass muster with a bankruptcy judge at a hearing scheduled for Nov. 4 in Brunswick.

"I am very pleased that the outcome of the auction process resulted in preserved and enhanced terms for our members, employees and trade vendors," Sea Island Chairman and CEO Bill Jones III said in a statement. "Together the bidders proposed a comprehensive plan that ultimately was higher than either bidder had bid alone."

Sea Island entered bankruptcy Aug. 10 claiming more than $1 billion in debts stemming from an ill-timed ultra-luxury revamp and land development surge. Though it had an agreement in place to be sold to Oaktree and Avenue out of bankruptcy, an auction was required by bankruptcy law.

Oaktree of Los Angeles and Avenue of New York are both specialists in distressed properties. Avenue CEO Marc Lasry owns a condo at the Sea Island Beach Club. Starwood is a $16 billion-in-assets Connecticut-based private equity group that has been buying up distressed real estate. Its CEO, Barry Sternlicht, founded the now independent Starwood Hotels & Resorts Inc., and created the W hotel brand. Anschutz is an owner of sports franchises--including the Los Angeles Kings--and sports arenas around the world.

"Sea Island is a special place with great heritage and a wonderful future," Sternlicht said. "We look forward to a long-term relationship with the company and to its transition to stable and debt-free operations."

The saga has gripped Sea Island members, employees and residents along Georgia's coast. The resort is a major economic driver for a region hard hit by the recession.

"We understand how important Sea Island is to the community and to its various stakeholders," Oaktree President and Portfolio Manager Bruce Karsh said. "We are confident that financially strong and well-capitalized owners will establish a new beginning at Sea Island."

In their proposal to buy Sea Island, the four partners are said to honor Sea Island memberships, keep Sea Island's 1,400 employees and Jones as its chairman and CEO.

The sale ends more than 80 years of ownership by the Jones family. And the Sea Island empire has already seen other significant pieces sold.


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