In the Law 360 article “Chapter 11 as a Viable Way to Redevelop Golf Courses,” Steven Werth discussed the ways in which Chapter 11 bankruptcy can be a possible lifeline for owners of financially distressed golf courses. Chapter 11 can offer a debtor the opportunity to reorganize the course and consider alternatives, such as development options, while knowing that the bankruptcy judge is aware of the problems facing the course and the industry as a whole.
“It will become increasingly difficult for creditors to base their pleadings on purported evidence of, say, mismanagement, when a reasonable explanation exists that explains the businesses’ drop in revenue,” Mr. Werth explains.
Mr. Werth also points out that bankruptcy courts will likely give golf courses time to reorganize, as the underlying asset, real estate, can almost always be redeveloped to become more profitable. “Even a vague assertion that the property can be redeveloped, without more, may be sufficient to buy a debtor time to retain experts, or an appraisal of the property, or at least to prepare and file a reorganization plan which contemplates that the debtor will continue to pursue redevelopment options.”
Conditions from before a golf course owner’s declaration of bankruptcy still apply, and the debtor will have to work to renegotiate them if their plan is to redevelop. However, a Chapter 11 reorganization can have benefits that should be carefully considered by the owner of any golf course facing serious financial difficulties.
