Lost credit line said to spur company’s closure

Consolidated Resorts, a Las Vegas time-share company that filed for bankruptcy earlier this month, was forced to close when a key creditor cut off a $250 million line of credit, bankruptcy attorney Lenard Schwartzer said.

Schwartzer, who represents Consolidated and 12 other affiliated companies in bankruptcy court, gave bankruptcy Judge Linda Riegle an overview of the company and its collapse during a hearing Friday.

Consolidated, which developed the Tahiti Village Resort on Las Vegas Boulevard, closed its business June 24, laying off 1,221 employees and contract workers.

Although former workers are expected to be among creditors, people who bought deeds to time shares at the companies' resorts are not affected by the bankruptcy filing, Schwartzer said.

Consolidated Resorts has sold most of the time shares at the resorts and the owner associations have enough money to maintain the properties. Also, the resort management companies that run the resorts did not file for bankruptcy.

Time share owners hold deeds to time intervals at the resort and thus own the resorts, the lawyer said.

"They are able to call up and get their week as if this bankruptcy never happened," Schwartzer said.

However, attorneys said they fear some time-share owners may stop making payments.

So Riegle authorized the companies to temporarily hire a company to start collection actions against delinquent time-share owners, pending a final decision on a contract with a collection company.

The time share companies typically finance all but a 10 percent down payment on time share sales and then assign the loan rights to outside companies.

Consolidated was solely relying on GMAC Commercial Finance for a $250 million line of credit backed by those receivable accounts earlier this year, Schwartzer said. In addition, GMAC Commercial Finance is owed under a $200 million for an acquisition and development loan.

About half of a time share's sales price represented marketing, overhead and related expenses, not the property itself, the attorney explained. So without that financing, Consolidated could not close on timeshare sales, he said.

In addition to GMAC Commercial Finance, the largest creditors are HSBC Bank USA and Textron.

Schwartzer estimated several thousand timeshare sales prospects, who were promised four days in Las Vegas, also are creditors.

Consolidated and the 12 related companies filed for Chapter 7, which calls for liquidation of assets for the benefit of creditors.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.