Club Seeks Chapter 11 Protection : Finance: Coto Valley owners seek to block foreclosure pending sale of conference center, lease of equestrian facilities used during Olympics.
Owners of the Coto Valley Country Club--whose facilities in the gated community of Coto de Caza hosted the Modern Pentathlon competition in the 1984 Summer Olympic Games--have filed a petition for reorganization and protection from creditors’ claims under Chapter 11 of the U.S. bankruptcy code.
The move is aimed at forestalling a foreclosure action by National Bank of Southern California, which is owed $550,000 on the mortgage for the club’s conference center and equestrian facilities. The filing is by Silver Bronze Corp., a nonprofit mutual benefit organization incorporated in California. Court documents filed Tuesday in U.S. Bankruptcy Court in Santa Ana list almost $5.1 million in assets and about $900,000 in debt.
Club President Randy Johnson, a Newport Beach mortgage broker, could not be reached for comment Thursday.
Newport Beach bankruptcy attorney Richard Marshack, who is handling the case, said the club’s difficulties stem from a precipitous drop in cash reserves because of declining membership.
To solve the problems, he said, club officials plan to sell the conference center and lease the 25-acre Coto de Caza Equestrian Center to an outside operator to raise money to pay off the bank debt and “provide adequate capital to continue operating a successful community club.”
Coto Valley Country Club was founded when development of Coto de Caza began about 20 years ago. For most of that time the club--which is not related to the Coto de Caza Golf and Racquet Club--was open only to residents of the gated community. Its facilities include a gymnasium, fitness center, swimming pool, youth center, conference center, restaurant and lounge, tennis and racquetball courts, 120-acre shooting and hunt club and the 25-acre Coto de Caza Equestrian Center and clubhouse.
In 1989 the club was deeded to its members by Coto de Caza’s developers, and in 1990 it began selling memberships to non-residents to increase its cash flow.
“But the opening of the golf and racquet club and the decline in the economy happened at about the same time,” Marshack said. The result has been a decline in Coto Valley’s membership to about 500 from more than 700 at its peak.
In addition, membership dues have fallen dramatically--they were reduced to $50 a month in April from $125 monthly in 1990--and initiation fees that once ran as much as $5,000 have been eliminated.
Though the result is that more people can now afford to join the club, the cash flow from the reduced fees is substantially less than in the past.
The club owns most of its facilities, however, and aside from its $550,000 bank debt owes just $220,000 to vendors and $112,000 to Orange County for property taxes, Marshack said. He said that the club is in escrow on the sale of the conference center and that directors are confident the deal will go through and an operator can be found for the equestrian club--an event that probably would open the facility to much broader use.