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To the right is a picture of the north entrance of The Greenbrier, which bills itself as "America's Resort." But after some surprising developments last week, it may be known soon as Jim Justice's resort.
CSX has owned The Greenbrier since 1910, when the railroad's predecessor, the Chesapeake and Ohio Railway, bought it. Last year, the resort, a victim of the downturn in demand for luxury resort lodging and its parent's loss in railroad freight volume, lost $35 million.
Earlier this year, CSX hired Goldman Sachs to analyze its options regarding the resort. What CSX and Goldman apparently determined was that CSX didn't want to, or couldn't afford to, keep the resort, so in March, The Greenbrier Hotel Corporation, the CSX entity that owns the resort, filed Chapter 11 bankruptcy in United States Bankruptcy Court in Richmond, Virginia. In re: Greenbrier Hotel Corporation, Case No. 09-31703 (E. D. Va.).
Contemporaneously with that filing, the hotel corporation announced that it would sell the resort to Marriott Hotel Services, Inc., in a deal that would provide Marriott up to $50 million over two years to operate the resort. Ultimately, Marriott would pay CSX between $60 and $130 million, depending on the hotel's financial performance, over seven years.
At least, that was the deal that everyone thought was in place until last Thursday, when Jim Justice, a West Virginia coal operator, announced that his family-owned company, Justice Family Group, LLC, had purchased the resort and 80% of The Greenbrier Sporting Club from CSX for $20.1 million. Here is Justice's letter to the resort's employees and West Virginia Governor Joe Manchin's statement regarding the sale. Justice has also agreed to pay a $2.6 million break-up fee to Marriott.
Not surprisingly, Marriott disagrees that Justice has a binding contract to purchase The Greenbrier, and said that it expects CSX to follow through with its agreement with Marriott. Justice has said that he will ask the bankruptcy court to dismiss The Greenbrier's bankruptcy, but according to this story from Hotel Online, the assistant United States Trustee explains that the bankruptcy must still run its course, including an auction scheduled for June 12. Here is the hotel's motion to dismiss the bankruptcy cases and shorten the notice period for hearing on the motion, which was filed last Friday.
If the auction goes forward, don't automatically assume that Marriott will outbid Justice. Marriott is in a stronger position financially, but Justice completed a deal earlier this year in which he sold his his companies' coking-coal interests to Mechel OAO, a Russian mining and metals company, for $436 million in cash and 83.3 million preferred shares of its stock.
And although $20 million for The Greenbrier is a bargain, Justice may still be willing to pay more for the resort than Marriott, particularly if Marriott has to sue CSX to enforce its contract. On the other hand, Marriott appears to have a solid tortious interference claim against Justice, especially since Marriott said, as of last Friday, that it didn't know anything about a break-up fee.
