MISSOULA – The owner of the ultra-exclusive Yellowstone Club says she opposed a $375 million loan blamed for the resort’s financial collapse, but never tried to stop the transaction.
Taking the stand in a federal bankruptcy case that has unveiled the ritzy club’s behind-the-scenes dealings, Edra Blixseth said her former husband, Tim, moved $209 million from the loan into their private accounts, with no intention of paying it all back.
“I was quite concerned with us getting a loan of that amount of money,” she said. “Tim was the decision maker and when it came down to a decision that was going to be made on that, my job as always was to go along with it.”
The couple founded the club in 2000 and attracted more than 300 deep-pocketed members before seeking Chapter 11 bankruptcy protection last November.
Tim Blixseth contends its finances were in solid shape when he gave up control of the club in August as part of the couple’s divorce settlement. He said his former wife “absolutely drove that company into the ground” after she took over.
Most of the loan was diverted from the club and used to bankroll the Blixseths’ luxury lifestyle of private jets and international estates.
The club is now more than $400 million in debt, riling its rich members who worry their multimillion dollar investments in its real estate could plummet in value.
The club’s creditors say the Blixseth-Credit Suisse loan was illegal and should not have to be repaid. That would make more money available to the creditors out of proceeds of the club’s upcoming sale.
An open auction for the Yellowstone Club is scheduled to open Wednesday and conclude May 13. An opening bid of $100 million has been offered by Sam Byrne, a club member and managing partner of CrossHarbor Capital Partners of Boston.
Also on Monday, a real estate expert testified that the 2005 loan was based on faulty assumptions that sales at the club would be brisk.
John Hekman, a former Federal Reserve economist called by the creditors, says at the time of the loan, Credit Suisse projected that the pace of sales of lots on club land would double.
According to Charles Bradley Foster, a financial consultant for the club who testified Friday, 85 lots were sold after the loan was made, at an average sale price of $2.4 million. But each sale generated less than $50,000 for the club after it paid down the loan and met development and transaction costs.