Ambassadors International Inc., the operator of Windstar Cruises, won court approval to sell virtually all its assets to a unit of billionaire Philip Anschutz’s Anschutz Corp. for about $39 million.
U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware, said today that he will sign an order approving the sale once final language has been drafted.
Ambassadors has “established their burden of proof” and “the court is satisfied that the process was fair,” Gross said during a hearing. The offer is fair, and the sale “will protect trade creditors and customers” with about $19 million in claims and deposits at stake that the Anschutz’s unit will take over, in addition to saving hundreds of employees’ jobs, he said.
Ambassadors, based in Seattle, operates Windstar’s three-ship luxury yacht fleet, which shuttles patrons to “the hidden harbors and secluded coves of the world’s most sought-after destinations,” according to a company statement. The ships carry 148 to 312 passengers to 50 nations in Europe, the Caribbean and the Americas.
The company listed $87.3 million in debt and $86.4 million in assets as of Dec. 1 in Chapter 11 filings.
The Anschutz subsidiary, TAC Cruise LLC, beat Whippoorwill Associates Inc. in a two-day auction that ended May 17 with an all cash offer of about $39 million, which also includes taking on certain liabilities, according to court documents.
Ambassadors entered bankruptcy with an agreement to sell its assets to its lender Whippoorwill.
The Whippoorwill offer would have forgiven debt and assumed other liabilities in exchange for the assets, which the company valued at about $38.9 million, court papers show. White Plains, New York-based Whippoorwill is Ambassadors’ secured lender, owner of about 88 percent the secured notes, and largest shareholder, with about 22 percent of the company’s equity.
“The auction did what it was supposed to do,” Kristopher Hansen, a lawyer representing Ambassadors, told Gross yesterday when the hearing to approve the sale began. “It flushed out a higher and better bid.”
A third party came in and bought the assets through an auction process and that is a market test, and “a market test is the best test.”
“This is not a process where people bid against each other and the market spoke,” John K. Sherwood, a lawyer for the committee of unsecured creditors, said at yesterday’s hearing.
Whippoorwill drove the sale process so “it should not come as a surprise that the exact number that was submitted was exactly enough to pay off Whippoorwill and administrative claims,” he stated. Sherwood told Gross he believed Ambassadors could be worth more than $80 million.
Sherwood said that Steven Gendal, a principal of Whippoorwill, told other bidders if they “bid one penny more” than Whippoorwill’s offer they wouldn’t overbid and they could have the company, in effect setting a ceiling on the bidding rather than a floor. “We don’t think the process was a true indication of value,” he said.
“McDonald’s hamburgers sell for the price they sell, because that’s what people are willing to pay, and that’s what we have here,” Whippoorwill attorney Mitchell Karlan said defending the allegations.
The company was willing to provide financing to other potential buyers, he said.
“That’s how eager we were not to be the owner of this company,” he said. Whippoorwill just wanted to see its debt repaid, he said.
The bankruptcy code “does not require a distribution to unsecured creditors,” Gross said in a somber tone at the end of his ruling. “The court itself would like to see a distribution, but the code does not require it.”
The case is In re Ambassadors International Inc., 11-11002, U.S. Bankruptcy Court, District of Delaware (Wilmington).