The Greenbrier Resort
CHARLESTON – West Virginia’s acting lottery director is warning that a proposed restructuring of Sen. Jim Justice family’s Greenbrier Hotel Corporation must fully address tens of millions of dollars in debt and tax liens before the resort’s limited gaming license can safely be renewed.
In a July 10 letter, acting Lottery Director David R. Bradley cites “considerable” liabilities and recent placement of the Justice Family Group on a formal financial watch. The letter was sent to Charleston attorney Steve Ruby, who represents the Justice family and its businesses, including The Greenbrier.
Justice
Bradley’s letter also details concerns raised during a June 30 emergency meeting over renewal of The Greenbrier’s limited gaming facility license, which is held by Greenbrier Hotel Corporation under the control of the Justice Family Group.
Bradley writes that an outside accountant reported the Justice Family Group had negative working capital driven by a “significant increase in current financial liability,” prompting Bradley and Deputy Director of Finance and Administration Michelle Painter to place the group on financial watch “in order to ensure that your financial situation stabilizes.”
Bradley also says the Lottery has received some documentation about a planned acquisition and reorganization of Greenbrier Hotel Corporation, but says key pieces still are missing, such as a completed acquisition application, purchase agreement, operating agreement, financial information and key personnel information. He warns that, given the incomplete record, the agency is “unlikely” to present the transaction to the Lottery Commission before its regularly scheduled August meeting at the earliest.
The Lottery’s concerns about The Greenbrier also are mentioned in a court filing by Omni on July 15, which was filed the day before The Greenbrier had said the financing deal would be finalized.
The Lottery letter zeroes in on what Bradley calls a “predominant concern” of the Justice family’s “considerable debt,” including obligations that are sealed and others that have been widely reported in tax and court records.
Bradley cites coverage that West Virginia’s Tax Division has placed “a series of liens” on The Greenbrier, including “more than $4 million because of sales taxes that were collected but not remitted to the state,” referencing prior reporting on Justice family tax issues.
Bradley also refers to a non-binding term sheet provided by the Justice side that describes the proposed $500 million loan intended to “repay in full all existing secured indebtedness of the (Justice Family Group) secured by the Greenbrier Assets and Tranche B Assets.”
That term sheet matches public assertions by Justice lawyers in federal court that a financing package with alternative credit manager Kennedy Lewis Investment Management would be “enough … to resolve other outstanding obligations like tax liens” while paying off loans held by Omni-affiliated White Sulphur Springs Holdings.
Omni and WSSH have used those same filings to argue that The Greenbrier’s value has dropped, its market share has eroded and its owners have diverted “nearly all operating cash flow” to related Justice businesses, leaving too little money to maintain the historic resort and service its debt.
In legal filings, Omni has characterized the Justice family’s finances as “deteriorating” and says the Greenbrier has been treated as a funding source for unrelated ventures, one filing describing the practice as “looting.”
Bradley says, under state law and Lottery regulations, a limited gaming license is “a revocable privilege” conditioned on a licensee’s continuing eligibility, qualifications and suitability, including “character, reputation, experience and financial integrity” and “adequate capital” to build and maintain a gaming facility for the life of the license.
Bradley writes he would find it “difficult to conclude that the licensee possesses ‘financial integrity’ or ‘adequate capital’ if the proposed transaction does not address all outstanding debt – both to private creditors and to the State of West Virginia.”
Bradley cautions that if the agreement simply allows the Justice Family Group to take on a new loan “and new debt” without eliminating all existing debt, it will “only compound the problem instead of resolving it.”
He writes it would be “extremely difficult” to support any agreement that fails to account for all outstanding liabilities, calling it “irresponsible” to do otherwise and “contrary to the intent of the financial watch.”
The Lottery’s concerns exist with a backdrop of intertwined litigation and refinancing efforts involving The Greenbrier, Omni and Carter Bank & Trust, which sold more than $200 million in past-due resort loans to an Omni-linked company earlier this year. Omni’s affiliate, White Sulphur Springs Holdings, has asked a federal judge to appoint a receiver for The Greenbrier and has argued that mounting Justice family debt makes repayment of those loans “deeply in doubt.”
Justice family entities have responded with their own suits, accusing Omni and Carter Bank of engineering a “hostile takeover” of The Greenbrier through the sale and acquisition of the hotel’s debt. In federal court, Justice lawyers have touted the $500 million refinancing term sheet referenced in Bradley’s letter as a way to make Omni’s claims “moot” by paying WSSH in full and resolving tax liens and other obligations.
Bradley’s letter suggests the Lottery is not prepared to take those assurances at face value and will require full documentation of how the refinancing and corporate reorganization will restructure the Justice Family Group’s obligations before signing off on the Greenbrier’s gaming license renewal.
He says he is “cautiously optimistic” that the agreement will satisfy the group’s obligations and “alleviate my concerns,” but stresses the need for complete information and a comprehensive review before the Lottery Commission can act.
Bradley urges Ruby and his clients to stay in close contact with the Lottery’s Licensing Division “to keep the process moving” so the proposed acquisition and reorganization can be ready for commission consideration by August.
