Kmart pass holders still paying lawyers

[legalskier]

I figure it's highly likely that a jury will decide in the favor of the lifetime pass holders.

If the defendants' summary judgment motion is granted, it will never get to a jury (unless that ruling gets overturned later on appeal).

 

[legalskier]

I think it will probably boil down to a reading of the original contracts and unless they were able to negotiate for some sort of clause in that contract that guaranteed the contract even in the event of an Asset Purchase, they may be out of luck.

But if they did, whom would such a guarantee get enforced against, Jay? The company that originally sold the bonds (Sherburne Corp?) probably is defunct now. The TimesArgus article doesn't mention Sherburne as a defendant. And the current owner/operator of Killington never agreed to such a guarantee. I agree that the original bond holders aren't getting the benefit of the bargain. Interesting....

 

[jaywbigred]

But if they did, whom would such a guarantee get enforced against, Jay? The company that originally sold the bonds (Sherburne Corp?) probably is defunct now. The TimesArgus article doesn't mention Sherburne as a defendant. And the current owner/operator of Killington never agreed to such a guarantee. I agree that the original bond holders aren't getting the benefit of the bargain. Interesting....

Well I had the same question, they obviously wouldn't have a party to sue on the guarantee. I am not familiar with deals like this, but I'd assume there would be some mechanism for building it in...an escrow fund or some type of investment/insurance created at the time the contracts are entered into to guarantee a pool of money from which to draw in the event that lifetime passes are extinguished? Or perhaps there could be a reversion on the death of the bond holder whereby ownership of the bond reverted to the issuer such that in an asset purchase, the purchaser would be purchasing the revisionary interest in the bonds because they are an asset of the target corp?

From my limited exposure to the facts of this case, doesn't sound like anything like this was done, but I think you probably COULD do it, somehow, if you wanted to.

 

[Tin Woodsman]

It took a few reads to realize that the 'them' you refer to are the secondary buyers, and I see your point that they took less risk. But you are forgeting/ignoring the two aspects of the original bond investment. There were two inducements for investment. One was interest paid on the capital invested. The other was the transferable lifetime pass. The capital has been paid back, and the interest has been paid. Those original investors still have the right, and as part of the the compensation for their original risk, to sell their bond. You would take that right away from them (and their assigns) because.... the company they founded and funded was successful?

That's for the court to decide. What's for me to decide is whether I have any sympathy for the small army of people who have been buying these passes on the secondary market.

Right. I have seen the lack of accuracy you are refering to, both in newspapers and TV. But if a reporter for a local paper from which the jury pool will be selected can't easily tell the difference between Killington the resort that Pres built and Killington the collection of assets that POWDR bought, how do you think the rest of the jury pool will likely see it? They will bring that perspective to the jury pool. That perspective will survive their education on facts of the case and case law. That's my point. The If-it-walks like-a-duck principle.

Not disagreeing here. My point was that your reference to the author of the Times Argus piece sounded like an appeal to authority, which that author most certainly is not.

 

[Geoff]

That's for the court to decide. What's for me to decide is whether I have any sympathy for the small army of people who have been buying these passes on the secondary market.

I figure that anyone who bought a liftetime pass resale when ASC was on the financial ropes doesn't deserve much sympathy. That was not a good bet. Anyone who bought a lifetime pass resale before then has made their money back many times over.

I have a little bit of sympathy for a few less affluent retirees who have lifetime passes. They'd factored the lifetime pass into their retirement plans and it's not like they're swimming in money to buy season passes. At least they're paying the senior rate.

 

[ctenidae]

I think I get where you're coming from, but I disagree. The original bondholders were awarded free skiing, the priviledge and bond was transferable, and stated so on the bond. Therefore, the ability to sell the bond was contemplated from the get-go. The rights and priviledges of the secondary buyers are just as valid as the primary, unless you want to strip some of the rights and value from the primary holder. He woud then be unable to sell, and would have less value to his bond.

But a bond is an obligation by the comapny- if that company no longer exists, then there is no bond anymore. The risk that the company, and therefore the bond, might disappear is the risk the holder takes (that's why in a financial bond you get paid the coupon). For the last few years, the ski passes should have sold at a discounted rate, since the risk that ASC would disappear was high (higher risk, higher return). I don't feel sorry for the recent buyers. They took a risk, and it didn't pan out.

 

[mister moose]

But a bond is an obligation by the comapny- if that company no longer exists, then there is no bond anymore. The risk that the company, and therefore the bond, might disappear is the risk the holder takes (that's why in a financial bond you get paid the coupon). For the last few years, the ski passes should have sold at a discounted rate, since the risk that ASC would disappear was high (higher risk, higher return). I don't feel sorry for the recent buyers. They took a risk, and it didn't pan out.

Except in this case, the issuing company, The Shelburne Corp, still existed through SKI Ltd and ASC as it was purchased in entirety. At the time of sale from ASC to KSRP there was a several million dollar (3?) escrow account set up for just such claims. If the court finds that the asset sale was invalid and was in fact a purchase of the entire company, the liability would be with the existing owner, KSRP. It is much more complicated than what you describe.

They took a risk, and the courts will decide how it pans out. I thought some of the prices paid for the bonds were too high on the secondary market, but I also think the screw job handed the bondholders by KSRP deserves a bright spotlight of discovery and judgement in a court of law. Given that the discovery has been sealed by the court, we may never know why the final decision is made, but there will either be a settlement or a judgement.