Sea Island files for bankruptcy, Oaktree among potential buyers

After fighting off bankruptcy for much of the past year, the Sea Island Co. finally filed for Chapter 11 protection from its creditors earlier this month. The owner of Sea Island Golf Club in Saint Simons Island, Georgia has agreed to sell two golf courses, hotels, spa, beach club and other resort properties for $197.5 million.

The prospective buyer, Sea Island Acquisition LP, is a partnership between Oaktree Capital Management of Los Angeles and Avenue Capital Group of New York. If no other buyer outbids Sea Island Acquisition in an auction, the new company should emerge from bankruptcy in November. The high-end resort has $482 million in debt.

Bill Jones III, the third generation head of the family-owned company, took over the golf resort in 1992. In 2001, he launched a plan to turn Sea Island into the “Pebble Beach of the East, a playground for the global elite,” BusinessWeek reported in December.

He rebuilt the hotel, built a new golf course, rspent $65 million on a new spa, and hosted the G8 Summit in 2004.

The company payroll jumped from $35 million to $85 million and the number of employees more than doubled to 2,500.

In 2003, Sea Island started the 3,000-acre Frederica community with the private Frederica Golf Club, designed by Tom Fazio. There were 400 home sites that the company hoped to sell for $1.5 million per lot.
Getting financing was not a problem, since Jones was on the board of a regional bank, Synovus Financial Corp. As construction began in 2003, Jones told Cigar Aficionado magazine: "The banks almost pay you to borrow money today."

For a time, the company relied on real estate sales to prop up its resort business, which was losing $80 million a year, BusinessWeek reported. When the real estate market crashed in 2007, Sea Island began to default on loans. It started cutting expenses, including firing more than 400 employees.

Sea Island deeded the Frederica development and about 500 acres of land on St. Simons Island to creditors in November to avert foreclosure.

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