Rimrock representative details recapitalization strategies

LakePoint officials give update on bankruptcy filings

James Swift
Posted 6/12/18

For Dan Berman, when eight different LakePoint Sporting Community affiliates filed a petition for Chapter 11 bankruptcy Monday, it represented "a culmination of efforts" for both himself …

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Rimrock representative details recapitalization strategies

LakePoint officials give update on bankruptcy filings


For Dan Berman, when eight different LakePoint Sporting Community affiliates filed a petition for Chapter 11 bankruptcy Monday, it represented "a culmination of efforts" for both himself and numerous stakeholders within a California hedge fund.

"What we're doing in this restructure is we're contributing assets back to LakePoint once the court essentially puts the stamp of approval on the new and reorganized entity," Berman said. "And that basically creates the certainty and the stability where we can make additional investments — large investments or debt investments — into that entity on a forward basis."

Berman, senior managing director of Atlanta-based GlassRatner Advisory & Capital Group LLC, was brought in by Rimrock Capital Management LLC to help them with financial workouts and restructuring after LakePoint Land LLC transferred their assets to them in 2016.

Rimrock's involvement with LakePoint goes back to the $1 billion complex's inception, with Berman stating the company has made loans and "additional fundings" to LakePoint for about five years.

"We plan to continue to operate during this process, and as we emerge, essentially we're doing it because we want to be absolutely certain that the entity is clean [and] free of all claims, which gives certainty to us as we make additional investments into the project," Berman said. "What we're doing, essentially, is converting our debt position to an equity position and the investors, they retain their equity positions in that reorganized entity."

Berman said he anticipates the Chapter 11 process to be "relatively brief," estimating the proceedings to take between 120-150 days. 

LakePoint CFO Bob Zurcher said activities will continue as planned at the complex over the summer.

"Operationally, we're going full-tilt," he said. "We're as busy as ever ... our employees are focused on customer service and doing their jobs to deliver a good guest experience. That's at the forefront of our goals as a staff."

Nor will any existing partnerships or sponsorships be suspended. 

"We're as committed as ever to sponsors, to creating value and expanding," Zurcher said.

Bartow County Administrator Peter Olson said he doubts the Chapter 11 filings will have any negative impacts on economic developments within the LakePoint corridor.

"They're estimated to generate a $95-$99 million annual economic impact based on the number of visitors that come to the region," he said. "That's going to continue ... visitors won't see any difference at all." 

In total, Berman said Rimrock has assumed about $22 million in LakePoint debts.

"The goal here is to, basically, put LakePoint on the strongest financial foundation we can," he said, "which simply means no debt, just equity and a fully equitized balance sheet."

Rimrock has "two buckets of claims" in the bankruptcy proceedings, Berman said. Those are "insiders" — parties affiliated with LakePoint that are converting their claims to equity as part of an agreement with Rimrock — and traditional third parties.

For the insiders, the claims include things like deferred management compensation and investor services, such as consultations. The other claimants, Berman said, are "regular vendors" who Berman said are either being paid "in the ordinary course already" or will be paid as part of Rimrocks's recapitalization plans.

"There is a support agreement and a term sheet in the filings and that essentially outlines all that we've agreed to," he said. "We become an equity investor ... since we are the largest contributor of capital to LakePoint ... and with respect to the other equity, they also retain their interests in that reorganized entity."

Olson said he believes the bankruptcy will help resolve some uncertainties about the complex's future. "The change in ownership and the change in management has all been kind of out there [and] now the dust is going to settle," he said. "All of this will get behind them and they will start the next chapter with a new page turned, so to speak."

Not all of LakePoint's facilities and assets are included in the Chapter 11 filings. That includes the Champions Center indoor pavilion — constructed via a $36 million county bond — which is owned by the Development Authority of Bartow County. 

As for the impact of the Chapter 11 filings on future and ongoing developments at LakePoint, Berman said the influence should be minimal.

"We've been making fundings and investments into additional land as well as funding what we call 'pre-development work,'" he said. "That helped spearhead the ultimate groundbreaking and construction of the road and bridge, which is very well underway and moving along quite nicely ... while that is being developed, we are developing additional land that's alongside the road on a concurrent basis."

The bankruptcy proceedings shouldn't have any bearings on the hotels and restaurants on and near the complex, Olson said. 

"Rimrock's got $55 million-plus invested in that so they have a heavy vested interest in making that project succeed," he said. "Some people say they went bankrupt like 'game over' at the end of Monopoly and you're out of business. This is financial restructuring ... this isn't 'well, we're shutting up the shop.'"

Indeed, Olson said Rimrock has committed to invest at least another $10 million into the complex over the next two years.

"They're planning on putting more money into the project so that they can get a better return over the longer run," he said. 

Nor does Olson believe the Chapter 11 filings will skew county tax revenue.

"Teams are still coming in, they're staying in hotels, they're buying food and beverages," he said. "The property values out there aren't affected. When LakePoint sells land down there, some of those parcels went for something like $1 million an acre."

While the original operators of LakePoint did many things right, Berman said the initial owners also failed to accelerate development as quickly as they needed.

"The facilities are clearly state of the art, some of the premier facilities in the country," he said. "In terms of what went differently ... it's a large undertaking and it just didn't grow fast enough."

Berman described how the new restructuring plan intends to keep Rimrock from repeating that same mistake. 

"You start with stability and certainty, and that starts with your balance sheet," he said. "You go from a balance sheet with debt to equity, so it gives you an opportunity to be strategic, patient and thoughtful about your development as you go forward, and it allows you to create more opportunities to attract additional investment as you go forward. I think that's the primary thing we can do to create an environment for sustained, long-term success for LakePoint."

Berman said he sees virtually no risk of the Chapter 11 plan falling apart before its Oct. 9 deadline. Nor did he say he can envision a scenario in which Rimrock would consider selling off the complex — or even a portion of its holdings — as part of their debt reduction strategy.

He also said Rimrock will not be pursuing any forms of government subsidies moving forward with LakePoint development.

That's a positive, Olson said, because the county is extremely unlikely to allocate any more funding towards the project.  "We've got as much skin in the game down there as we want to," he said. "I don't see the commissioner having any interest in further economic investment in that project. They're big enough now they should be able to carry it on from here."

Rather, Berman said Rimrock plans on expanding LakePoint through larger events and developing more real estate. 

"We want to grow and create value as best we can [and] that will take time to do that," he said. "We think the process we're going through gives us the best opportunity to be thoughtful and strategic as we continue to invest into LakePoint and continue to grow it."