The private Reserve Golf Club in Pawleys Island has filed for Chapter 11 bankruptcy protection, a move its Board of Managers hopes will facilitate the sale of the club to McConnell Golf.
Club members believed they had negotiated a sale in May to McConnell Golf, which owns and operates five other private clubs in the Carolinas. But the sale has been stalled by a class action lawsuit initiated by four resigned members seeking reimbursement for membership fees that would not be reimbursable under terms of that sales agreement.
Chapter 11 allows for reorganization under a court-approved plan, and the board is hoping the lawsuit and sale will be resolved through the court's ruling.
"This action comes after many months of careful consideration by the club's board, and its members and shareowners, including identification and evaluation of all alternative means to enable the club to remain viable as a going concern," said Ben Catanzaro, Reserve Club president and member, of the filing which was made Friday.
Catanzaro expects the bankruptcy process to be concluded within 90 days. Though a prearranged purchase agreement between the club and McConnell Golf was expected to be part of a filed plan to emerge from bankruptcy, Catanzaro said Monday he expects an auction of the course, which is owned by its members, to be part of the case's resolution, and McConnell to be among the bidders.
McConnell Golf owner John McConnell said he is content to wait out the legal process. "We're waiting to see how the rulings go," McConnell said. "If it's in line with what our offer is and it's acceptable, then I guess we'll move forward in a timely manner."
Reserve Club assets are valued at $1.16 million in the bankruptcy filing, including 326 acres valued at $750,000 that have a restrictive covenant limiting commercial use into 2054. Total liabilities from creditor claims are listed at $226,918, with the two largest coming from Plantation Federal Bank for $55,000 each. Projections in the filing estimate show the club will be operating in the red by $1,636 per month.
The club has approximately 350 active dues-paying members and 150 inactive resigned members. Gene Connell, attorney for the inactive members, said initiation fees for the resigned members were between $12,000 and $35,000, and inactive member Michael Sacco said one resigned member is entitled to 80 percent to 90 percent back for every four new members that join.
"The resigned members are entitled to their repayment or some resolution, not just washing away their claims," Connell said. "Their rights are being cut off in order to keep it private, and that doesn't seem too fair to me. They own a golf course and all they want to do is keep it private. If they open it up for public play they would have no problem and could make money on it."
Connell also scoffed at the property's estimated value of $750,000. "I do not believe a 326-acre golf course in Pawleys Island is worth only $750,000," he said. "I've got some snow to sell to the Eskimos."
McConnell said he has spoken to other private courses about adding them to his company's holdings, but he's also committed to the Reserve Club members.
"I think we're committed to the membership to ride with them until a decision by the court is made," McConnell said. "The members have voted to accept our offer, which is the most positive step from our standpoint."
He's also more optimistic about a deal now that the matter is in the court system. "This one has been a long drawn-out process, but at the same time I think it's more positive for us than it was before," McConnell said.