Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. -Mark Twain

Tuesday, March 3, 2009

ILX Resorts Files for Chapter 11 Bankruptcy Protection

Another company with ties to Rocky Point real estate development has found itself in the financial deeps. In this case the developer is ILX Resorts, the second timeshare company to choose Puerto Penasco for one of its resorts.

Headquartered in Phoenix, AZ., ILX is a relatively small player in the timeshare industry with a total of 11 timeshare resorts, mostly in the Western United States. Its most famous resort is Los Abrigados in Sedona, AZ. The company bought land in the Las Conchas area a few years ago to build its second Mexico timeshare resort and about a year or so ago opened up a sales room there, with a location in one of the new RP plazas for booking tours. That didn't last very long, though. I suppose the meltdown of the US economy had something to do with that, along with the rough competition from the Mayan Palace timeshare touts who still own the streets in Rocky Point in terms of recruiting tourists for presentations.

ILX also owns the Sea of Cortez Premiere Vacation Club in San Carlos, adjacent to the San Carlos Plaza Resort, which opened its doors in mid 2001.

Anyway, ILX hopes to be able to reorganize through Chapter 11 and come out healthy on the other end. A publicly owned company, a year ago ILX stock was trading for $5.60. Today the share price was $.40 (cents).

Like most of the timeshare companies, big and small, the credit crunch has hit them hard. In case you don't know (or care?), timeshare companies rely on being able to sell their receivables in the same way that mortgage companies do. It's a cash intensive business, and without credit liquidity for day to day operations as well as building new resorts it's very hard for them to stay afloat. Add to that the default rate as people can no longer afford to keep their timeshares, plus fewer people willing or able to buy, and you've got an industry in trouble.

In a regulatory filing ILX said for the third quarter of 2008 it had negative revenue of $4.2 million because of $14.8 million in uncollectible revenue it recognized. This caused a loss for the quarter of $7.3 million compared to a loss in the 2007 quarter of $290,000 on revenue of $12 million.

For the nine months ended Sept. 30, ILX reported revenue of $17.8 million, down from $35.9 million for the same period a year ago. The company also reported a net loss of $8.14 million, or $2.24 per share, compared with $801,194 the year before. The third-quarter results, reported Nov. 14, included the write off of consumer notes receivable and an increase in the allowance for doubtful accounts.

The company said that the decision to file for bankruptcy protection became necessary when a loan and security agreement from Textron Financial Corp. for $4.6 million was terminated Sunday after it and Textron couldn't agree on terms to extend the loan. The note is secured by 14 acres of land in Sedona.

Chapter 11 filings allow a business to reorganize while receiving protection from creditors. The company’s announcement March 2 said Chapter 11 protection will enable ILX (NYSE:ILX) to conduct business operations as usual.

The filing involves the Phoenix company and certain of its subsidiaries and limited liability companies.

“Dramatic challenges in the economy and recent unanticipated reductions in our credit facilities caused by disruption and instability in the capital markets have necessitated that we seek reorganization protection to preserve resources for an orderly restructuring of the Company,” said Joe Martori, Chairman and CEO.

I never was quite sure just where in Las Conchas the resort was to be built; did they ever actually break ground?

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