Daniel Schmitt, president of HHHunt, said in a letter sent Tuesday to the club’s members that it will take the plan to federal court Dec. 14 for final approval. HHHunt developed the Dominion Club in 1992.
If the bankruptcy court approves the plan, club members will receive partial refunds on their hotly contested initiation deposits. And the club can get back to business as usual.
“This will then set a known future course for your club, and we can begin the process of providing creditors some financial return on their initiation deposits and continue to provide outstanding service to our members,” Schmitt said in the letter.
The Dominion Club filed for Chapter 11 bankruptcy in January after it said it could not pay $1.7 million in initiation deposit refunds that had come due to about 100 members at the end of 2010. Another $10 million in deposit refunds was due down the road.
Some members joined the club by paying initiation deposits of $10,000 to $24,000, and those deposits were marketed as fully refundable.
Some of those members will receive 11 cents on the dollar, with other options paying out over time.
The legal scrum isn’t necessarily over, though.
Fourteen of the club’s members voted against the reorganization, which allowed them to retain their rights to file individual lawsuits against Hunt. Those dissenters temporarily put the future of the club in jeopardy, as Hunt had the right to back out of the plan if anyone voted against it.
According to Schmitt’s letter, Hunt was able to get some of the 14 to opt into the plan, with only a few holding firm in their opposition.
Nevertheless, Hunt is rolling the dice.
“We believe that moving forward with our plan, even with some opt outs remaining, is in the best interest of the Dominion Club and its members,” Schmitt said in the letter.
Although they argued throughout the process that paying the refund deposits was not their responsibility, Hunt and the other entities, all of which are tied to Hunt, agreed to several levels of repayments that members can choose from as part of the resolution.
The first level would pay 11 cents on the dollar to the 124 members who were owed a combined $1.7 million.
In addition to putting up more than $3 million for the partial initiation deposit refunds, the plan also calls for the Hunt to support the club with a working capital loan over the next five years.
It will also lower the monthly rent the club pays and look to sell the club and distribute the proceeds to member/creditors within the next 12 years. Complicating the case was the fact that the Dominion Club pays rent to another HHHunt entity that owns the land under the golf course.
Some members will have the option to wait for the club and the related real estate to be sold with the hope of fetching a higher payback.
Vernon Inge, an attorney with LeClairRyan who is representing the club, said Hunt’s decision is great news.
“Hunt has stepped up to solve the problem,” said Inge. “This will allow the club to reorganize, and it should be a solid club going forward, which was our goal with bankruptcy.”
Once the judge confirms the plan, it will be effective in early 2012. The first round of initiation deposit payments will go out in May.
Marshall “Nick” Nichols, a Dominion Club member and chairman of the bankruptcy creditors committee, said he was happy to come home to find the letter from Schmitt.
“I’m pretty pleased that things have been able to be worked out,” said Nichols. “It’s been a long process, but I guess we got where we wanted to be in the end.”
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected]