Diamond Resorts Places Stalking Horse Bid on Bankrupt ILX Resorts

ILX definitely won’t look this gift horse in the mouth.

Diamond Resorts Corp., one of the largest vacation ownership companies in the world, is officially the stalking horse bidder for debt-ridden ILX Resorts.

In a recent proceeding, the insolvent developer received court approval for its joint reorganization plan with its largest creditor, Textron Financial Corporation. The reorganization, filed last January, named Diamond Resorts as the proposed purchaser of ILX’s assets.

A stalking horse bid is an initial bid on a bankrupt company’s assets from an interested buyer, chosen by that company. This allows the distressed company to avoid “low-ballers”, as the first bidder sets the tone for the purchase price. Only Diamond Resorts has placed a bid on ILX’ assets so far.

Phoenix-based ILX Resorts filed for Chapter 11 bankruptcy in March last year, citing “dramatic challenges in the economy and recent unanticipated reductions in our credit facilities caused by disruption and instability in the capital markets”.

The next hearing, set for July 23, will set a date for the sale of its assets. Unless another company surpasses Diamond’s stalking horse bid at the last minute, the Las Vegas-based corporation will officially become the new owner of ILX.

The court documents do not name Diamond Resorts as the buyer per se, but cites ILX Acquisitions Inc. as the official purchaser. Diamond founded the Delaware corporation last January for the specific purpose of acquiring ILX.

Under the agreement, Diamond offered a purchase price of $29,672,251. The offer comprises a cash payment of $5,856,913 and the assumption of ILX’s obligations under the Textron Loans.

Among these obligations are $23,800,000-worth of liabilities owed to Textron; loans made by ILX’s Sedona Vacation Club and Premier Vacation Club with M&I Bank; existing obligations to owner and guest reservations; and unpaid property taxes. Diamond will also shoulder the lease obligation with Indian Wells Partners for ILX’s property in Sedona, Arizona.

Diamond, meanwhile, will acquire all of the debtor’s rights, unexpired leases and property management agreements; all accounts, including timeshare loans; all unsold timeshare interest stocks; and a number of ILX’s properties, along with all their furniture, fixtures and equipment.

However, the sale will exclude certain assets stemming from ILX’s business operations. Among these are merchant deposits, income tax refunds, and timeshare loans and notes belonging to Resort Funding LLC and M&I Bank. In addition, the equity interests of ILX and its subsidiaries, along with some properties not stipulated in the contract, will be excluded from the acquisition.

Short URL: http://www.timesharepages.com/?p=3079