In 2008, Dick Fuld was responsible for the largest bankruptcy filing in American history as the long-time, last-ever CEO of Lehman Brothers. The investment bank's collapse—the result mostly of hoarding shitty securities backed by subprime mortgage loans—triggered a global recession that disfigured a lot of lives. That guy should probably never have control of anything ever again, not even a stake in a golf course. Well, Fuld is in fact a partner in the Malibu Golf Club, a non-membership course that is open to anyone willing to pay $100 a round. The golf club recently filed for its second bankruptcy and is now closed.
Fuld and his partners (various developers and venture capitalists) formed Malibu Associates in 2005, bought the 650-acre club in 2006 for $32.8 million, and then "took out millions more in loans to help with their grand plans to restore the course and add resort-style amenities," according to the LA Business Journal. They hoped to overhaul the 1976 club (which is in the unincorporated Santa Monica Mountains, not Malibu proper) into "a retreat suitable for corporate conclaves … [with] 40 bungalows, meeting facilities and a new clubhouse complete with a fitness center and restaurant."
Cal National Bank lent the group $40 million to help buy the club and fund the entitlement process for the makeover, and after Lehman collapsed in 2008, they asked Fuld to submit updated financial statements. According to a court filing by Malibu Associates, "Although these statements showed a decline in his net worth, they demonstrated that his net worth and liquidity still vastly exceeded the total amount of the indebtedness." It's mostly irrelevant to the story, but let's just pause here for a second and breathe that in.
Ok, so even though Fuld still had gajillions after tanking the global economy, Cal National got nervous, froze the credit line, and doubled the interest rate on the loan. Then they tried to foreclose on the golf club and that's when it went into its first bankruptcy, in 2009.
Meanwhile, that very same economic collapse tanked Cal National, and in 2009 regulators closed the bank and transferred its assets to US Bank. In 2011, Malibu Associates made a deal with US Bank that consolidated the loans and pushed back the due date, as long as the owners got their development approvals by October 2014. They've only just gotten the approvals, months past the deadline, and so US Bank has been trying to foreclose on its property.
Malibu Associates, though—which now owes $46.7 million—says US Bank had unrealistic expectations for them and really the bank should pay them $30 million "plus interest and attorneys' fees, for its alleged bad-faith dealings." It makes all these claims in its second bankruptcy filing, submitted last month. The club closed in November and, as of this week, is being marketed to both new investors and buyers "to pay off the debt and fund construction."
Business at the Malibu Golf Club was just fine before it closed—gross income was "at the high end of the average American course" in 2013, its last full year. Fuld and friends just took on too much debt.
· Golf Course Owners Still in Hole [LABJ]
Loading comments...