Accepting Liftopia’s Revised Debt Calculations, Ski Companies Push Forward With Involuntary Bankruptcy Petition
“Trying to understand what happened to our revenues, which to be clear, were never yours to begin with”
July 19, 2020
A very brief timeline of Liftopia’s yard sale
In late April, an independent ski operator forwarded me a note sent from Liftopia to its partners, outlining mass furloughs at the company and warning of a slowdown in service. Unmentioned in the memo but underscored by this operator was that Liftopia had not paid many of its partners for March sales.
On June 2, Aspen (on behalf of Mountain Collective), Alterra, Arapahoe Basin, and Boyne’s Cypress Mountain filed a petition for involuntary Chapter 11 bankruptcy against Liftopia in the Northern District of California U.S. Bankruptcy Court, claiming to be owed more than $3 million.
On June 24, Liftopia answered with a motion to dismiss the case, claiming that the companies had, collectively, overstated the amounts owed by more than $86,000. This disparity, Liftopia said, should be sufficient to dismiss the case.
On July 16, the ski companies answered, filing documents opposing the motion to dismiss and agreeing with the revised debts Liftopia had claimed. In declarations from representatives of all four ski companies, each acknowledged that they had reviewed the data that Liftopia had used to calculate the corrected amounts and agreed that the amended amounts were accurate.
Calculating the debts
The original debts claimed by the four ski companies had been based upon Liftopia’s own calculations. In all four cases, Liftopia maintained “sole control of the transactional data” related to ticket sales, and the ski companies relied on Liftopia “to calculate and make accurate monthly payments.” None had ever had a “meaningful dispute” with Liftopia prior to this past spring.
An email chain between the opposing parties’ lawyers that accompanied the other documents underscored this point. In an email from Joshua D. Morse, counsel for the ski companies, and Liftopia outside counsel Robert Eisenbach, Morse said:
As explained during our call last week, the Petitioning Creditors’ [the ski companies] claims were calculated utilizing the financial reporting provided by Liftopia. They have, as you know, no independent source of information to perform such calculations. Thus, the precision of the Petitioning Creditors’ claim calculations can only be as accurate and complete as the financial information made available by Liftopia.
Based on [Liftopia CEO Evan] Reece’s Declaration, it appears that, as of June 2, 2020, the information made available to the Petitioning Creditors by Liftopia failed to include certain “adjustments” leading to alleged overstatements of approximately $86,000 in the aggregate.
Following that email, Eisenbach forwarded Morse spreadsheets outlining Liftopia’s adjustments, which were then distributed to the various ski companies for review. Ultimately, each of the four companies agreed that the revised amounts were accurate, and filed court documents stating as much.
The mystery of the missing money
The four ski companies are trying to force an involuntary bankruptcy to, as one source told me, “use the court process to get their books to understand what they have actually been doing.”
An April 20 email chain between Aspen Chief Financial Officer Matt Jones and Liftopia CEO Evan Reece that was filed along with the other documents echoed these concerns, that money Liftopia collected from consumers on behalf of the ski companies could not be accounted for and may have been used for other purposes. The email chain read, in part:
“We are trying to understand how much of Mountain Collective funds, if any, you have held back at this point?” Jones wrote.
“Currently it is about $2 [million],” Reece replied.
“We will need some visibility on when you expect to make these payments, and what the triggers are that allows you to release them,” Jones replied. “When can you provide this to us?”
“As I get a clearer picture of our financing, I’ll share, but the timeline is imprecise for now,” Reece replied, adding that the company’s payment processor was withholding some funds out of concern that skiers would demand refunds should the 2020-21 season face disruptions.
“OK but what can you tell me about where you are in the process?” Jones asked.
Reece replied that he was focused on securing financing to repay partners, but noted that, “I anticipate pain for my existing cap table but that partners get paid.”
“Are you saying that (to the best of your knowledge) our funds won’t be released until some partner (equity or debt) gives you fresh cash?” Jones asked.
“That’s my conservative assumption at this point,” Reece replied. “There is potential for interim payments sooner.”
Jones replied the next day. “OK. So have you spent our money on other things like rent and payroll and therefore it’s gone? Or is it stuck in a bank account frozen by your lender? Trying to understand what happened to our revenues, which to be clear, were never yours to begin with.”
No follow-up by Reece was included with the email chain. A hearing is set for Aug. 6 in San Francisco.
Posted from The Storm Skiing Journal & Podcast
