BUTTE – A federal bankruptcy judge has rejected Edra Blixseth’s bid to reorganize her finances, pushing the founder of the ultra-exclusive Yellowstone Club into a forced sale of her many houses, cars and other properties.
Blixseth had appealed to U.S. Bankruptcy Judge Ralph Kirscher for more time to craft a business plan. After recently selling the Yellowstone Club for $115 million, she hoped to emerge from personal bankruptcy with her sizable fortune intact.
But Kirscher denied her request in a Tuesday ruling from the bench. The ruling followed a hearing in which lawyers for Blixseth’s creditors raised questions about her luxurious lifestyle and argued for a prompt sale of her assets.
Kirscher said under federal bankruptcy law the “standards had not been met” that would have allowed her to retain her assets while crafting a business reorganization plan. He said he would elaborate in a subsequent written order.
Blixseth said in an interview after the ruling that she would cooperate with a court-appointed trustee charged with liquidating her assets under Chapter 7 of the federal Bankruptcy Code.
“I’m disappointed, but we’re not going to just give up and roll under a rock,” she said. “We’re going to try to regroup and figure out the best way to maximize the value of the assets.”
Blixseth also vowed to continue fighting against some creditors she alleged submitted false claims against her, but declined to give specifics.
Blixseth founded southwest Montana’s ritzy Yellowstone Club a decade ago with her former husband, Tim. Since filing for personal bankruptcy protection in March, she claims to have scaled back her spending, sold off some of her jewelry and stopped using a private jet to travel.
She continues to live on a 240-acre California estate recently valued at $137 million.
Blixseth had listed debts of only $157 million in court documents, but acknowledged in testimony Tuesday that she owes up to $357 million.
She spent much of Tuesday on the witness stand, arguing that her Porcupine Creek estate in California and other assets would be worth more if she had time to properly market them.
“It would not only go up in value substantially, but trying to do a sale where people know it’s in Chapter 7 could bring in — I don’t want to use the word but that’s what they are — bottom dwellers,” she said.
Several of Blixseth’s creditors had asked Judge Kirscher not to give Blixseth the time she sought to reorganize. They argued that liquidation would yield maximum value for her assets.
Among those who opposed her request was Tim Blixseth. Accompanied at Tuesday’s hearing by his new wife, Jessica, he claimed to be owed at least $18 million by his former wife.
Edra contends Tim misled her during the lead-up to their divorce settlement. She has vowed to reopen their California marital case.
“There no joy in any of it,” Tim Blixseth said after Tuesday’s hearing.
He added that a trustee sale of Edra’s assets would ensure her creditors got the most money possible.
“Porcupine Creek will bring $100 million if it’s sold in an orderly manner,” he said.
An attorney for another creditor, Western Capital Partners, said her reorganization plan had been “unreliable. The Denver firm is owed $14 million from loans Edra Blixseth guaranteed as part of her son’s failed plans for a 1,100-unit housing development in Bozeman,
The firm’s attorney, Robert Hatch, had drilled into Blixseth on the witness stand, questioning her claim to be scaling back while still retaining a staff of 30 to 35 people at Porcupine Creek.
Edra Blixseth said the employees were needed to maintain the estate’s championship golf course and its many guest houses.
“I’m down to a skeleton crew,” she testified. “We probably do need a few more in order to completely maintain everything.”