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Goldman Loses Control Over Nanso Golf Club in Japan

Goldman Sachs Group Inc. lost management control of bankrupt Nanso Country Club outside Tokyo after a court accepted a petition by members to remove executives appointed by the Wall Street firm.

The Tokyo District Court on July 6 appointed attorney Yuzo Miyama to take over management of Nanso Country Club, Kunihiko Nishimura, a lawyer representing members, said in an interview. Miyama replaced Shigeki Kiritani, a Goldman Sachs managing director who was overseeing the club’s operations.

Goldman Sachs bought Nanso Country Club in November 2006 and took it into bankruptcy protection in January this year. Members last month voted against a rehabilitation plan proposed by the Wall Street firm, citing concerns that Goldman Sachs would allow more visiting players onto the course, depressing the value of memberships that cost about 1 million yen ($11,225).

“We wouldn’t be able to enjoy our club life as we did before if Goldman allowed more visitors to play golf here,” said Tomoo Onodera, 43, a Nanso Country member who lives in Yokohama.

Hiroko Matsumoto, a Tokyo-based spokeswoman for Goldman Sachs, declined to comment on the court decision or say how much the company paid for the club.

Narita Encounter

It isn’t the first time Goldman Sachs, the most profitable securities firm in Wall Street history, has found itself at odds with members of golf courses it acquired. In March 2008, the company won approval from creditors for a plan to rehabilitate Narita Golf Club that was opposed by members. Nishimura, who was a Narita member, led a legal team challenging Goldman Sachs’s plan at the time.

Goldman Sachs mainly owns golf courses in Japan through its Accordia Golf Co. affiliate, which the U.S. bank took public in 2006 and owns 45 percent of. Accordia, based in Tokyo, owns 130 golf courses in Japan.

Accordia shares have lost 55 percent since the company went public in November 2006. The company’s profit rose 23 percent to 10.4 billion yen in the fiscal year ended March 31, according to data compiled by Bloomberg.

Nanso Country, located about an hour’s drive from Tokyo, is a 12,590-yard (11,512-meter), 36-hole course with about 2,600 members. Goldman Sachs, which owns the club through its Bay Wind 2 Ltd. unit, listed 12.8 billion yen ($145 million) in liabilities in the bankruptcy filing, according to Nishimura. Member deposits accounted for 12.2 billion yen of the debts.

‘Just Another Club’

Under a so-called revitalization plan dated April 22 and filed with the Tokyo District Court, Nanso Country would borrow from Goldman Sachs to repay debts. The club would repay about 14 percent of members’ deposits.

Some 1,025 club members and creditors out of 1,744 voted against Goldman Sachs’s plan on June 23, according to Nishimura.

Goldman Sachs on June 23 won approval from members and creditors at nearby Newnansou Golf Club to restructure that club, said Takeshi Koibuchi, an attorney for Goldman. Nanso Country’s members are mainly individuals, while Newnansou’s are corporate, Nishimura said.

Nanso members filed a second bankruptcy protection request on June 23, asking the Tokyo District Court to remove Goldman Sachs’s managers and to cancel the bank’s claims as a shareholder. Under the second petition, the club’s members propose to give up their deposits in exchange for shares in Nanso Country, said Nishimura.

“The members didn’t want Goldman Sachs to integrate Nanso Country into its network, making it just another club in its franchise,” said Nishimura, 63. “They are seeking to rehabilitate their golf club by themselves.”

Membership Slump

Golf membership prices soared in Japan during the 1980s bubble economy, then slumped as the country lurched from one recession to the next. At least 800 golf clubs have gone bankrupt since 1991, according to Meiji Golf, which trades club memberships in Tokyo.

Asking prices for Nanso Country Club memberships are 1 million yen to 1.2 million yen, while bids range from 350,000 yen to 400,000 yen, Meiji Golf estimates. The value peaked at 16 million yen, according to Sakura Kyodo Law Offices, Nishimura’s firm.

Membership values at Accordia-owned courses have fallen faster than the nationwide average, said Kazunari Tsutsumi, executive director of Meiji Golf.

“Members feel squeezed as Accordia’s main aim is boosting revenue as a listed company, not preserving exclusivity,” he said.

The price of a membership at Narashino Country Club, a former host of the Suntory Open tournament, slumped to 200,000 yen this year from about 2 million yen seven years ago, according to Meiji Golf data. Accordia started operating the club in November 2002.

SEC Case

“Membership prices at most Japanese courses fell after the bubble economy burst, and we don’t think declines were only because of Accordia,” Harue Marumo, a spokeswoman for the company, said in an interview.

The U.S. Securities and Exchange Commission’s April lawsuit against Goldman Sachs over fraud tied to collateralized debt obligations hardened some members’ resolve to fight the firm, said Onodera. Goldman Sachs has denied wrongdoing.

“We don’t want to play golf under a company that is being sued for fraud,” Onodera said.

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