Broomfield’s Quintess files bankruptcy, owes $121M to members 

BROOMFIELD — Quintess LLC, a Broomfield-based luxury-travel destination club, has filed for Chapter 11 bankruptcy protection, citing $121 million in debt associated with membership-deposit refunds alone.

The filing was made Oct. 7 and was first reported by BusinessDen. Quintess filed a prepackaged plan of reorganization Oct. 12, urging quick action by the U.S. Bankruptcy Court in Denver.

“At this point in time, without a speedy confirmation and implementation of the Plan, the Debtor will have no choice but to cease operation of its business which will result in no recovery to any unsecured creditor,” the company said in the filing.

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Quintess sells memberships in luxury destination clubs under the “Quintess” and “Quintess Collection” brands. Members pay a one-time deposit and annual dues and can make reservations for travel to the club’s vacation properties. Hosting, travel-planning, house-cleaning and other services also are provided.

Quintess has seen its deposit price plunge in recent years. Since 2012, the price for a deposit has ranged from a high of $250,000 for a 21- to 28-night flex holiday membership to a low of $53,000 in 2015. Deposits were refundable until 2011, when Quintess stopped selling memberships with refundable deposits.

“The change from refundable to non-refundable deposits was due to difficulty in selling memberships at high price points during the economic recession and the years that followed and was consistent with practices of similar businesses in the industry at that time,” the bankruptcy filing states. “Through this change, the Debtor had hoped to encourage new sales in an increasingly competitive marketplace and highly sensitive cost-conscious consumer environment.”

Quintess further faced additional competition from new players in the industry that charged a much-lower entry price.

At the same time, Quintess had to modify its business model, which included owning luxury homes and renting them out to club members. But the Great Recession caused real estate values to plunge, and Quintess sold the homes in order to pay down $150 million in real estate debt.

That left members demanding refunds of their deposits, with not enough new members coming in to repay exiting members’ deposits.

Quintess has faced several lawsuits from such creditors, some of which have been resolved through arbitration.

“Because membership deposits were used to purchase real estate and the value of the real estate imploded and did not return by the time the real estate had to be sold, the Debtor does not have sufficient cash on hand or assets to liquidate to pay judgments in these cases if it were to receive unfavorable outcomes,” the bankruptcy filing states. “Furthermore, the Debtor does not have sufficient cash on hand to continue to pay legal fees it continues to incur in defending these suits.

Quintess’ prepackaged reorganization plan includes:

• New loan commitments from lenders of up to $6 million.
• A $3 million debt to Quintess’ only secured lender will be converted to 9,000 shares of Preferred A stock, which amounts to 9 percent of the total shares.
• All pre-petition agreements are rejected, with active members offered new memberships in the reorganized debtor’s Quintess Collection.
• Creditors with non-priority unsecured claims will receive common shares in the reorganized debtor. This would include members whose $121 million in debt would be converted into more than 40 percent of the company’s stock.

The prepackaged reorganization plan was supported by a vote of membership, after a letter detailing the company’s dire financial straits was sent to members by Quintess CEO Pete Estler.

“Time is not our friend — it is costly both to preserving our cash and to our brand,” Estler wrote. “We must move forward quickly with the pre-packaged plan so that we can minimize both time and cost in bankruptcy, turn on reservations past October 2016, and move on to making Quintess a great club again. A prolonged bankruptcy cannot be sustained.”

Quintess’ plan was sent to 539 creditors, with 311 returning their vote. Of those, 274 voted in favor and 37 against, the company said.