- The Washington Times - Friday, March 20, 2009

CHARLESTON, W.VA. (AP) - The economy caught up with the historic Greenbrier resort just as its owner cut off long-standing access to easy cash, sending it into the arms of would-be buyer Marriott International, according to bankruptcy records.

A detailed review of documents from The Greenbrier’s Chapter 11 filing Thursday found that the resort’s owner, railroad company CSX Corp., shut down an internal cash pool for the resort in December just as the recession was sapping demand for luxury hotel and conference space.

The former playground of presidents and royalty and site of a Cold War nuclear bunker for Congress had been losing money for five years and was left holding debts of more than $91 million to CSX, exacerbated by costly renovations. With losses accelerating this year, Jacksonville, Fla.-based CSX insisted The Greenbrier file for bankruptcy.

That happened Thursday, along with an announcement that Bethesda, Md.-based hotel giant Marriott was willing to buy the 6,500-acre resort for up to $130 million, pending court approval and a new labor deal with Greenbrier workers.

If The Greenbrier is to survive, Marriott must maintain peace with nine labor unions and find a way to lure more patrons to a four-star resort nestled in a mountain valley in southeastern West Virginia.

“Marriott brings a lot to it,” said Tom Botts, a hotel and travel consultant with Hudson Crossing.

Among other advantages, Marriott has a global, highly trained sales force adept at bringing groups and corporate meetings to its properties, Botts said.

“It’s one of those classic things,” Botts said. “CSX does a great job running railroads. I’m not sure running hotels is their forte.”

CSX has owned The Greenbrier since 1910. The bankruptcy documents suggest it gave resort managers plenty of financial freedom.

The Greenbrier was able to dip into CSX’s “cash pool” whenever it needed for more than two decades, according to an affidavit sworn out by the resort’s chief financial officer, Michael McGovern. And the resort was able to access funds quickly by selling receivables, or its outstanding bills, to another arm of CSX.

CSX put a stop to the practices in December, according to the documents.

By then, The Greenbrier had discovered it was not recouping the $48 million it borrowed from CSX for a facelift aimed at recapturing a coveted fifth Mobil Travel Guide star it lost in 2000 and at wooing a new generation of luxury travelers. The bankruptcy filing said the investment “proved untimely.”

“CSX could no longer justify further continuation of the debtors’ access to the cash pool,” McGovern said.

As the pool dried up, the recession meant well-healed travelers weren’t so well-healed anymore and big companies shied away from upscale junkets for customers and employees.

“The Greenbrier depends heavily on a lot of group and meeting traffic and very high-end leisure,” Botts said.

Financial troubles had already been growing. The bankruptcy filing showed The Greenbrier had wracked up more than $90 million in losses _ and more than $91 million in debt to CSX _ over the past five years, including a $35 million loss in 2008.

Revenues fell in the first two months of this year. The resort’s pretax loss was $3.74 million in January and $4.96 million last month.

McGovern said CSX hired investment bank Goldman, Sachs & Co. in August to evaluate what to do with The Greenbrier. By September, Goldman Sachs had started looking for buyers and finally settled on Marriott.

The Greenbrier’s problems were compounded by drawn-out labor negotiations with nine unions representing more than 900 employees. McGovern estimates the resort lost $25 million worth of business last year as customers opted for resorts that weren’t facing potential strikes.

CSX has agreed to provide $19 million in financing to The Greenbrier while it’s in bankruptcy, but the funds come with a price: relief from what the resort insists are outrageous labor costs equaling more than 70 percent of annual revenue.

Greenbrier attorney Dion Hayes said during a bankruptcy hearing Thursday the industry average is 40 percent or less.

Without a new labor deal agreeable to potential buyers, The Greenbrier would default on the $19 million CSX loan, unless U.S. Bankruptcy Court Judge Kevin R. Huennekens rejects the contracts. That could force The Greenbrier to liquidate.

(This version CORRECTS that Greenbrier was trying to recoup star from Mobil Travel Guide, not Michelin.)



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