Representatives of The Greenbrier Hotel and its owners have been alluding to a joint venture, rather than just a $500 million loan.
The iconic, 710-room Greenbrier in White Sulphur Springs features a private casino, four golf courses and a spa. Senator Jim Justice and his family bought the historic resort out of bankruptcy in 2009. It’s been at the center of Justice’s public persona.
It’s becoming clearer that the Justices are prepared to share the property as details have dropped like breadcrumbs across a series of publicly available documents. But none so far specify the exact percentages of control or ownership that the Justice family and its lender will each hold in the joint venture.
Justice and his family have been pursuing a financial arrangement with Kennedy Lewis Investment Management, a New York-based private credit and alternative asset firm.
Kennedy Lewis focuses on companies facing cyclical, secular or regulatory disruptions. Kennedy Lewis regularly enters into joint ventures, strategic partnerships and co-investment initiatives.
This is taking place against the backdrop of a federal lawsuit over control of The Greenbrier. Omni Hotels affiliate White Sulphur Springs Holdings bought about $300 million in first-lien debt on The Greenbrier and is asking the court to name a receiver to protect its collateral, pushing out the Justices.
The Justices, in turn, have maintained a financial deal with Kennedy Lewis valued at $500 million would be enough to pay down the debt to White Sulphur Springs Holdings and other creditors with enough left over to invest in hotel upkeep. They want more time to see that through.
Lawyers for The Greenbrier entered a response last week to an order by a federal judge to state why court proceedings should not start moving. The attorneys asked for an extended period to at least August 7 to continue work on complex financial issues.
They wrote that “this transaction is particularly complex, because of, among other reasons, its size — up to $500 million—the many entities involved and the need to reorganize them for the deal, the presence of dozens of parcels of real property for which title searches and other items of due diligence were required to be conducted, and the fact that the transaction is not merely a loan but a joint venture, which required the negotiation and delineation of the terms of the relationship between the transacting parties.”
The evolving financial relationship also means the terms have been under review by the West Virginia Lottery Commission because The Greenbrier has a casino license.
Lottery is aware that the Justices, solely in control of The Greenbrier and its casino to this point, will have some sort of new, shared ownership structure.
In a July 10 letter obtained through a Freedom of Information Act request, acting Lottery Director David Bradley “regarding a proposed acquisition and re-organization of the Greenbrier Hotel Corporation, which is currently under the sole control of the Justice Family Group LLC.”
For the review, Bradley wrote that Lottery would need “a completed acquisition application, purchase agreement, operating agreement, financial information, and key personnel information.”
He noted that “To ensure that a change or modification in structure or key persons is met, the Lottery must conduct its due diligence, and perform a comprehensive review prior to approving such a request,” continuing by saying that such a careful and detailed review could very well stretch into August.
The letter from the Lottery director made reference to a redacted term sheet about the proposed financial deal. That same redacted term sheet was submitted to the federal court case in late May.
The filing provides a broad outline of some of the potential financial arrangements.
The transaction involves an internal reorganization where the Justice family and Justice Family Group will create a new holding company and a wholly-owned subsidiary called “Greenbrier TopCo” and referred to in the filings as “Borrower” to hold 100% of the equity interests in the Greenbrier Resort assets.
So, prior to closing, the Justice family and Justice Family Group LLC will create an entity currently described as, straightforwardly, “Holdings,” which will then create Greenbrier TopCo as a wholly-owned subsidiary.
Immediately before the initial closing, the Justice family will cause Justice Family Group to contribute 100% of the equity interests in the Greenbrier Resort assets, adjacent development projects and land and timber farms to the newly-created Greenbrier TopCo.
The loan is to be secured on a first-lien basis by a pledge of the equity of the Borrower and its wholly-owned subsidiaries, as well as by all Greenbrier Assets. Additionally, the loan will be personally guaranteed by certain members of the Justice family and all other loan parties and subsidiaries.
The possible deal includes a negotiated governance structure with specific distribution restrictions, waterfall provisions, meaning funds are allocated sequentially in “tiers,” plus “governance and control rights” that define how economics and control are shared between the Justice Defendants and Kennedy Lewis Investment Management.
The specific details of the distribution restrictions and waterfall provisions are redacted from the public version of the term sheet because they are considered “highly sensitive financial and business information and trade secrets.”