Rocky times for the Yellowstone Club

Builders, florists and blacksmiths are counting their losses along with financiers and hedge-fund managers in the bankruptcy of the Yellowstone Club, a private ski and golf enclave in the Montana Rockies.

The club -- where Persian rugs line the ski lodge and a trail is named "Learjet Glades" -- sought protection from creditors on Nov. 10, brought down by the founders' divorce, profligate spending and a real estate slump. Members such as investment banker Robert Greenhill, founder of Greenhill & Co., want to know where their $250,000 deposits went. A local wastewater company wants the $5,472 it says it is owed.

Many small towns in the Rocky Mountain region rely on rich people who come to fish, ski and play golf. Now some destination spots are becoming desperation spots. Idaho's Tamarack Resort is being run by a court-appointed manager after defaulting on a $250 million loan at the end of 2007. Creditors forced the Promontory in Utah into bankruptcy in March.

"It's a pretty big impact on all the people who got stiffed," said Todd King, owner of Advanced Wastewater Specialists, who said he hasn't been paid for treating effluent at the Yellowstone.

With the recession, the timing couldn't be worse, he said. "We definitely don't want to work for free."

The pain is acute around Bozeman, Mont., about 45 miles to the north, where many of the club's workers live. The Yellowstone Club employs 400 to 600 people, depending on the season, and has a monthly payroll of about $882,000.

The club's woes started well before the U.S. recession. When Tim Blixseth and his now ex-wife, Edra, opened the club, they billed it as the most exclusive ski resort in the world. The Blixseths signed up ski-film director Warren Miller to be director of skiing, and brought in a former U.S. Secret Service agent to be "director of privacy."

Medina resident Greg LeMond, a three-time winner of the Tour de France, was an early investor and homeowner. But LeMond sued the club in 2006, saying the Blixseths borrowed $375 million from Zurich, Switzerland-based Credit Suisse Group and took $209 million for themselves as a dividend, jilting him and other investors.

Credit Suisse spokesman Duncan King said the bank arranged the loan to the club and is acting as an agent in the bankruptcy for holders of the debt.

The Blixseths used the money to buy boats, cars and a 16-bedroom chateau in France for $28 million, LeMond alleged. The parties settled the suit this year for $39.5 million, though Edra Blixseth missed a Nov. 15 deadline to pay the $13.5 million balance still owed, according to a filing by LeMond in Montana state court.

Edra Blixseth didn't return an e-mail seeking comment for this report.

The club remains open after getting court approval Dec. 12 for an emergency $19.8 million loan from club member Sam Byrne, founder of CrossHarbor Capital Partners, a private equity firm in Boston.

For years, concrete trucks thundered up the narrow road to the club, and a parade of pickups lined up at the security gate each morning.

The list of 700 creditors filed in federal bankruptcy court reads like a Yellow Pages of Bozeman and the surrounding area. A local florist is owed $17,285 and a blacksmith wants $1,095 for shoeing horses. Scenic City Portables, which provides portable toilets, is waiting for $12,430. Even Montana's utility company is out in the cold: NorthWestern Energy is owed $247,000.

'As whole as possible'

Mary Warmoth's company, We Dust Control and Deicing Inc., sprayed dirt roads along the 18-hole golf course to control dust last summer. The club owes her $4,147.

"The thing that was the most shocking to us was that they knew they couldn't pay the bill when they asked us to do the work," said Warmoth. "One of the guys up there told our driver, 'Good luck getting paid.' "

Brett Mauri, who runs custom home builder Bitterroot Group in Big Sky, Mont., is among those whose hopes were dashed by the club. He put down a $250,000 membership deposit and built a 7,800- square-foot house there that he planned to sell to a wealthy club member.

He listed the home last year, just before credit market crashed and prices tumbled. At about the same time, the Blixseths were embroiled in a bitter divorce dispute that raised questions about the club's future and spooked buyers, Mauri said.

Edra Blixseth wrested the club from her ex-husband in July, resolving the issue of ownership, and Mauri found a buyer who offered him $6 million for his house, $2 million less than the assessed value, he said. The sale was supposed to close in November. When the club filed for bankruptcy, the buyer walked.

"We used our kid's college fund for that membership," his wife, Michele, said, fighting back tears in U.S. Bankruptcy Court in Butte on Nov. 25. Their son, 17, is scheduled to start school in the fall.

"Now the money's gone," she said.