Gated community near Park City out of bankruptcy

A half-built private development of multimillion-dollar homes emerged from bankruptcy troubles on Thursday.

U.S. Bankruptcy Judge Judith Boulden approved a reorganization plan for Promontory, a 10-square-mile gated community with opulent clubhouses, golf courses and horse stables near the ski town of Park City. It is the first to recover among a handful of resort communities from Hawaii to Florida that were forced into bankruptcy by the real estate meltdown.

The agreement, hailed by all sides, lets leading creditors represented by the Swiss investment bank Credit Suisse take over the private mountain community. In court papers, Credit Suisse says the developer defaulted on $275 million in loans in December 2007. The bank doesn't hold the loan, which was sold to hedge funds and other investors, but it acts as agent for the loan holders.

"We're pleased that the plan was confirmed," Credit Suisse spokesman Duncan King said Thursday.

Dallas-based Highland Capital Management owns about 40 percent of the loans and will become a major player in the resort's reorganization, lawyers said. Highland Capital refused comment on Promontory's prospects or its role.

"It's back to business as usual, which in these economic conditions is a great relief for the homeowners and creditors," said Thomas J. Beckett, a Salt Lake City bankruptcy lawyer for homeowners and other unsecured creditors.

Nearly half of the 750 building lots have been developed with expensive mountain homes.

The developer, Phoenix-based Pivotal Group, could lose control of the community but says that was expected.

"It's not what we hoped for or intended but there's been a dislocation in the economy," said Karl L. Polen Jr., executive vice president of Pivotal Group. "This protects the brand of Promontory."

Boulden approved the reorganization quickly Thursday after nobody objected in court. The swift approval came because with so much money sunk into the project, Promontory is considered a prized asset that is "worth so much more operating than warehoused," Beckett said.

Promontory is worth $560 million, according to an appraisal last June of developer-owned assets. The figure doesn't include the value of individually owned lots that have been sold or developed with about 300 homes.

Under the reorganization, Promontory's major lenders have until March 19 to demonstrate they can raise about $70 million to pay some debts and sustain operations.

Failing that, the debtors could sell Promontory at auction, and Pivotal said it would be among the bidders.