COURT FINDS IN FAVOR OF WESTLB AG IN BANKRUPTCY PROCEEDINGS CONCERNING THE DANCING BEAR DEVELOPMENT IN ASPEN — FORECLOSURE OF DANCING BEAR MAY PROCEED
On May 25, 2011, the Honorable Michael E. Romero, a federal judge with the United States Bankruptcy Court for the District of Colorado, entered a 23-page written Opinion granting WestLB AG’s Motion for Relief from Automatic Stay. WestLB AG is a bank that had provided over $58 million in financing for development and construction of the Dancing Bear, a fractional-unit private residence club in Aspen, Colorado.
The Dancing Bear development consists of a fully constructed building adjacent to Wagner Park in downtown Aspen and a skeleton frame of an unfinished building across the street. The Dancing Bear project was not completed, experienced large cost overruns, as well as difficulty marketing and selling its inventory of fractional units.
After the Dancing Bear entities defaulted on their loans, followed by numerous work-out attempts and agreements to forbear, WestLB commenced foreclosure proceedings in Pitkin County District Court. The Court subsequently appointed a receiver to oversee and manage day-to-day operations of the Dancing Bear project. In 2010, various single-asset real estate entities affiliated with the Dancing Bear project sought protection from its creditors by filing for bankruptcy, which, under federal statute, automatically stayed all other proceedings. As the Debtors in the bankruptcy case, the Dancing Bear entities sought to reorganize and to obtain the upwards of $35 million in additional financing from other sources to complete the project.
Judge Romero’s detailed Opinion concluded that the automatic stay should be lifted so that WestLB can pursue its remedies as a creditor of the Dancing Bear project. The bankruptcy court determined that WestLB would not be “adequately protected” because the Debtors had no feasible plan to ensure repayment to its creditors, the largest of which was WestLB. Specifically, the court found that the Debtors’ proposals “are simply too speculative and too attenuated to comprise a reasonable probability of a successful reorganization within a reasonable time.”