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Posted: 1:03 PM- A federal bankruptcy judge has granted Chapter 11 status to the ritzy Promontory Ranch Club near Park City.
The action cleared the way for the resort to borrow money so it can make payroll and keep the lights on.
An order signed by Judge Judith Boulden on Tuesday allows Promontory's parent, Pivotal Promontory LLC, to immediately borrow up to $1.4 million to keep the resort operating.
It's a temporary solution that will buy time for two lending groups to find a long-term solution to Promontory's financial problems that have been blamed on the national credit crises, Salt Lake City-based attorney Kenneth L. Cannon said Wednesday
The Promontory Ranch Club, located east of U.S. Highway 40 in Summit County, covers some 7,000 acres and includes two 18-hole golf courses, a riding academy, club houses, restaurants and lounges.
The development is made up of more than 1,900 large home sites for upscale vacation homes. Only 200 have been built upon. The endeavor makes money primarily through the sale of its real estate.
In 2005, Promontory borrowed $275 million from a group headed by the Swiss bank, Credit Suisse. It also borrowed $75 million from a second group, now headed by Wells Fargo.
In early March, Credit Suisse, representing the first-lien holders, requested that Summit County's 3rd District Court place Promontory in receivership after the resort failed to make $8.7 million in interest payments.
But the Wells Fargo group, representing the second-lien holders, filed a petition in U.S. Bankruptcy court last week, fearing the first-lien holders would foreclose on them, said Cannon, who represents the second-lien holders.
Tuesday's court ruling and subsequent order will keep the resort operating in the near-term.
"Everybody wants that," Cannon said, referring to both lending groups. "The real value [to the development project] is an operating resort."
Neither representatives from Promontory nor Credit Suisse could be reached for comment Wednesday.
Cannon said in the coming month, Promontory will borrow another $25 million from either Credit Suisse or Wells Fargo to sustain the operation - until an overall solution can be agreed upon.
The hope is, Cannon said, that the real-estate market will rebound and the exclusive building lots will begin to sell again.
"The fact that the lots haven't been selling as quickly as they did is directly or indirectly related" to the national credit crunch.
For Brendan Kawakami, a cook at Promontory, a coming paycheck is the best news. He had feared that he would soon be looking for a new job.
Now he plans on staying.
"I feel good about it," he said Wednesday. "It's a good position and the pay is good."
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