Benson edges closer to becoming owner of bankrupt golf club

When Gov. Craig Benson pulled the plug on any additional lending to the bankrupt Golf Club of New England, he might have been playing a high-stakes game of poker with attorneys representing both the members and creditors — and even U.S. Bankruptcy Judge Michael Deasy.

Attorneys for the golf club withdrew a motion for the governor’s company – Soft Draw Investments – to lend the club another $600,000. They said that a stipulation, backed by Deasy, to double the $15,000 that the $500-an-hour attorneys for a members’ committee wished to carve out of the bankrupt business was simply going too far.

“He (Benson) could dare the court,” said Deasy in an April 19 hearing. “And the court could dare him. And we will see who blinks first.”

Benson didn’t blink. And as of deadline, a new attempt to put forward the loan was being filed, apparently without the extra lawyers fees. And the last hand isn’t the loan, but the bankruptcy reorganization plan itself.

On the one hand, Benson would appear to hold all the cards. Benson, who co-founded the posh golf club on the Stratham-Greenland line, holds the $17 million mortgage. Soft Draw is the largest secured creditor. His loan would have made it possible for the course to open on time. And his future cooperation is necessary for the club to open at all.

For the 180 members, who have ponied up $55,000 to $65,000 in initiation fees plus annual dues in the $10,000 range, Benson represents their chance to play in the club for which they have already paid.

On the other hand, Benson has the most to lose should a deal with the members and the creditors not work out. It is his collateral that will dissipate, his customers who could disperse, and in the end all he could collect is some 450 acres of real estate that has declined in value.

In addition, there are both tax and political reasons for Benson to come to the table.

If Benson can’t work out a deal approved by the bankruptcy court, and forecloses on his mortgage, the bankruptcy would fall out of Chapter 11 and into Chapter 7. Under Chapter 11, Benson would be exempt from a real estate transfer tax, which he would be responsible for under Chapter 7. That savings, which would easily exceed $100,000, would double should Benson wish to sell the course again.

“There is a substantial amount to be saved here,” said Deasy. “The legitimate cost (of Chapter 11 bankruptcy) may not seem unreasonable as compared to the benefits.”

Of course, those benefits constitute a loss of revenue to the state of which Benson is governor, although his attorney, Bruce Harwood, said that Soft Draw is a separate business entity, not a mere extension of the governor.

Deal in the works?

Separating the governor’s political and economic interest may not be so easy. For instance, Todd Feinsmith, the members’ committee attorney, broached a potentially discomforting word when talking about the loan. That word is “discovery.”

The loan, noted Feinsmith, who was attending a recent bankruptcy hearing via speakerphone from his vacation spot in Florida, is an insider loan, since Soft Draw made it when Benson was an officer and founding member of the club.

Joe Foster, attorney for the other major stakeholder in the case, Channel Building Co. – builder of the $4.5 million clubhouse — also questioned the validity of the loan. Foster – who happens to be a state senator from Nashua – worried that any further lending by Benson would put his client even further back in line, and questioned the condition of the loan.

“You are giving the keys to a lender that didn’t act like a traditional lender until today, and now it wants all of the benefits of a traditional lender. Now it wants to hold a gun to everyone’s head,” Foster said.

Thus it’s important, Feinsmith said, to discover whether Benson’s original $12 million loan, and the additional $4.6 million loan made after he was elected governor, were “equitable, and that my require discovery.”

That raises the possibility that a sitting governor could be deposed under oath in a private legal matter. It was such a deposition that got President Bill Clinton impeached, but even without such an unlikely and extreme result, who needs a private legal battle in the midst of a re-election campaign?

Harwood said that his client wouldn’t be intimidated by such talk, but he also said he was getting frustrated by both attorneys’ demands. He later told Seacoast Newspapers, “If (Benson) is going to be putting in that kind of money, he would rather do it as an owner, rather than a lender.”

And it’s likely he will be the owner. While other parties have expressed interest, none are willing to pay the $14 million asking price for the club, said Peter Tamposi an attorney, who represents the club itself.

The question is how is he going to become the owner? Is it going to be a deal, or a fight? So far, noted Judge Deasy dryly, “it is not as if we have been warm and friendly in this case.”

On the other hand, most observers think a deal will be struck sooner rather then later, at least by Benson, the club and the membership committee. Reaching a deal with Channel Building might be more difficult, Tamposi said.

“Still,” said Tamposi. “You never know with this case.”