Hawthorns Golf, HGCC plans filed; lender submits $7 million lead bid

By Caroline Salls

Pittsburgh, July 25 – Hamilton Proper Partners Golf Partnership, LP, which does business as Hawthorns Golf & Country Club, and HGCC Lender, LLC filed amended competing plans of reorganization and related disclosure statements, and HGCC Lender filed a motion for approval of a sale of substantially all of the company’s assets, according to Thursday filings with the U.S. Bankruptcy Court for the Southern District of Indiana.

Hawthorns plan

The company said its plan is designed to restructure its financial obligations and to establish a financially strong club. Unless terminated before the plan effective date, current club members will be entitled to continued membership under a new membership plan.

Hawthorns said it has obtained new financing that will pay the claim of HGCC and end the threats of foreclosure and take-over by HGCC.

Administrative claims and other priority claims will be paid in full under the company’s plan.

On the effective date, the company’s debtor-in-possession financing will be converted to equity in the reorganized club, and Horizon III, LLC will become a new equity interest holder through its membership in HPPar 18, LLC. If the proposed new equity interest holders or their affiliates are not the equity owners of the reorganized club, the balance of the DIP financing will instead be paid in full.

Priority tax claims will be paid over five years with 3% interest.

Horizon Two, LLC and Horizon III deposits will be utilized according to pre-bankruptcy agreements and will only be refunded in the event the purchaser of their lot does not wish to obtain a membership with the club or later resigns. Any deposits owed to Horizon Two and Horizon III on the bankruptcy filing date will be paid over a period of five years, beginning on May 1, 2015, without interest.

HGCC secured claims will be paid in full using an outside loan and a portion of a new value contribution.

Within 30 days of the closing related to the payment in full of Golden Investment VIII, LLC’s secured claim, the $11.58 million held in trust for that creditor will be paid to Golden Investments. The remaining balance owed under a membership note will be paid by remittance of the membership payments received by the reorganized club.

Secured lease equipment claims will be paid in installments until the principal and interest are paid in full.

On the effective date, all existing membership promissory notes for refundable initiation fees will be extinguished. All current members in good standing will be entitled to repayment of their refundable initiation fee. All current members will be required to sign a new membership plan.

All resigned members as of the bankruptcy filing date can choose within 30 days of the effective date to rejoin the reorganized club and forgo all rights to distributions or will remain in the same order on the resign member waiting list as before the filing date. Resigned members will be entitled to a repayment amount equal to 40% of their total refundable initiation fee.

Lacys unsecured claims, Sunset, LLC unsecured claims, Horizon III unsecured claims and trade creditor unsecured claims will be paid over five years beginning May 1, 2015 without interest.

The unsecured claims of NADA, Sana, and HDG Trust will be converted into equity in the reorganized club if the new equity interest holders are the equity owners of the club. Otherwise, they will retain their rights as general unsecured creditors.

The ownership interest of the company’s current general partner, HDG HPPGP GENPAR, LLC, will be extinguished. The ownership interest of limited partner Sunset, LLC will remain in the reorganized club, subject to a change in ownership with the new value contribution, in which Sunset will participate.

Lender liquidation plan

Meanwhile, the sale structure under the HGCC plan provides for HGCC to purchase Hawthorns’ assets and to operate the assets as a private golf club. If HGCC is the buyer, current members and resigned members of the existing club will be provided rights and benefits in connection with the new club, depending on the terms of the final asset purchase agreement.

HGCC said these benefits could include the ability to exchange current unsustainable deposit refund rights for a new, more sustainable deposit refund right under new club membership documents.

The HGCC Lender plan also calls for the appointment of a plan agent to complete the sale and administer the plan.

Administrative claims, priority tax claims and priority unsecured claims will be paid in full.

Holders of secured tax claims are expected to recover 100% through assertion of statutory collateral rights.

Holders of equipment lessors’ secured claims will retain their liens or interest on the equipment securing the claim.

Golden will retain its security interest in the member obligations, be entitled to retain any installments received by the company on member obligations and remitted to Golden in accordance with the cash collateral order as a credit against its claim and receive any collections on the member obligations being held by Hawthorns, which will be paid over to Golden. In addition, member obligations will be transferred to Golden.

Holders of club member claims will receive a share of net available funds after payment in full of senior claims, in addition to their right to exchange their initiation fee, receive a refund of a portion of initiation fees on a sliding scale and become a member of the new club.

Resigned members who join the club within 90 days can do so with no initiation fee. Resigned members will also share in the company’s net available funds.

Holders of general unsecured claims and class 10 insiders claims will share in the net available funds.

Holders of interests will receive no distribution.

Sale motion

According to the motion filed Thursday, HGCC’s stalking horse bid includes a $5.5 million cash component, of which $5 million will be paid via an offset/credit against the HGCC secured claim if that claim is still outstanding and paid in cash if not, plus a $500,000 cash payment, plus value equal to the replacement of initiation fee refund rights to members, plus value equal to the amount of pre-paid credits honored, plus value equal to the assumption of assumed contract and lease liabilities, plus the value of a projected $1.34 million capital improvement commitment.

If HGCC is the buyer, up to $500,000 of the cash payment will be designated for payment of administrative, priority tax and priority unsecured claims and the costs and expenses of the plan agent and his professionals.

To the extent that the total of those claims and expenses is less than the designated amount, HGCC will be entitled to a refund of the difference.

HGCC said it believes the total purchase price is valued at more than $7 million.

If HGCC is not the high bidder, it will receive a $200,000 break-up fee.

Competing bidders must be able to establish a $1 million reserve for capital improvements, deferred maintenance and working capital and to meet the operational requirements of the golf club, including evidence of unrestricted and available cash on hand of at least $7 million pre-closing and at least $5 million post-closing.

The cash component of initial overbids must be at least $5.8 million. Subsequent bids must be made in minimum increments of $100,000.

Hamilton Proper, the Indianapolis-based owner of private membership golf club Hawthorns, filed for bankruptcy on Jan. 24, 2014. The Chapter 11 case number is 14-00461.

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