UPDATE: Synovus client Sea Island Co. files for bankruptcy, to sell assets

Sea Island Co., the owner of a posh coastal Georgia resort and a major debtor to Columbus-based Synovus Financial Corp., has filed a Chapter 11 bankruptcy petition to sell all of its assets to two investment firms for $197.5 million.

The filing was made late Tuesday in the Brunswick Division of the U.S. Bankruptcy Court’s Southern District of Georgia. Sea Island, about 80 miles south of Savannah, is among a cluster of barrier islands on the coast that include Jekyl Island and St. Simons Island.

The luxury resort and real estate development company said it plans to sell “substantially all” of its properties to a limited partnership set up by investment firms Oaktree Capital Management of Los Angeles and Avenue Capital Group of New York.

“Our commitments to our members, employees, guests and community were carefully considered throughout our review of strategic alternatives and we believe this is the best outcome,” Bill Jones III, chairman and chief executive officer of Sea Island Co., said in a statement.

Jones, whose grandfather, Alfred “Bill” Jones Sr., opened The Cloister hotel with a partner in 1928, will continue to lead the company under the sale agreement, which still must go through a court-supervised auction — a legally required attempt to find a highest bidder — then have it approved by a bankruptcy judge.

“The purchasers have seen first hand the value of what we have built — the finest collection of resort assets in the world with the highest accolades and best service,” Jones said. “The additional financial strength gained through the transaction provides an ideal foundation for our future.”

It was Jones who had a vision to take the once-modest coastal resort to a higher level geared for the ultra-wealthy, investing in new lodging, golf and recreation facilities. The work began after President George W. Bush hosted world leaders there for a Group of Eight summit in 2004.

Aside from The Cloister, property names include The Cloister Spa and Fitness Center, The Lodge, The Sea Island Club, the Ocean Forest Golf Club and The Sea Island Beach Club.

Synovus, under now retired Chairman and CEO Jim Blanchard, reportedly loaned Sea Island up to $300 million to construct the new properties. But as the economy teetered into recession in late 2007, Jones’ plans began to fall apart as even affluent travelers and vacation-home prospects cut back on spending.

Blanchard and Jones, who were once on each other’s company boards of directors, then cut their corporate ties.

The Columbus banking firm, which lost $1.4 billion in 2009, classified the Sea Island loans as “non-performing” last year and has been waiting for the resort company’s next step in its financial meltdown.

Synovus spokesman Greg Hudgison said Wednesday the banking firm is aware of the bankruptcy proceedings by Sea Island, but can’t comment on them.

Synovus employs about 6,400 people companywide, roughly 1,500 of those in Columbus, with bank offices scattered through Georgia, Alabama, Florida, South Carolina and Tennessee.

It is among the U.S. banks still grappling with failed real-estate development loans, having written off more than $2 billion in bad loans so far amid the housing downturn and economic recession. The company has been hit hardest in the once-hot Atlanta and coastal Florida markets.

To shore up its financial position, Synovus earlier this year raised $1.1 billion from sales of common stock and other securities.

Sea Island, in its filing Tuesday, said it owed more than $600 million combined to Synovus and two other major lenders — Bank of America and Bank of Scotland. The company also said it has assets of nearly $604 million and total liabilities of about $825 million.

The resort company said its Chapter 11 filing will “free” it of the money owed to the three secured lenders, while its 1,400 workers will be able to seek employment with the new owner — Sea Island Acquisition LP.

The company, which is the largest private employer in Glynn County, said its properties will remain open during the bankruptcy process and that all reservations will be honored.

“It’s paramount that they do,” said Woody Woodside, executive director of the Brunswick-Golden Isles Chamber of Commerce. “They touch about every family and business in this community in some direct or indirect way.”

Sea Island Co. said it expects to exit Chapter 11 and complete its sale by the end of this year.

The Associated Press contributed to this report.