State to lend $4 million more for Rocky Gap improvements

Bondholders agree to advance the project an additional $565,000

April 12, 2003|By June Arney | June Arney,SUN STAFF

The state will lend an additional $4 million to Rocky Gap Lodge & Golf Resort to finance improvements aimed at improving business at the struggling Western Maryland attraction, state officials said yesterday.

The low-interest unsecured loans are to be supplemented by an additional $565,000 from the project's bondholders, who have agreed to postpone interest payments for more than a year. Those investors - three mutual fund companies - have said they will not foreclose on the project through 2006 and will consider restructuring the project's debt, state officials said yesterday

"The restructuring is part of our plan to get the Rocky Gap facility to operate within its own cash flow," said Robert C. Brennan, assistant secretary for financing programs in the state's Department of Business and Economic Development.

"The bondholders have agreed to take an interest holiday through June 2004, giving Crestline time to do their magic to properly market and get the groups and increase the occupancy," he said.

(McLean, Va.-based Barcelo Crestline Corp. was brought in a year ago to manage the Allegany County resort.)

Those interest payments would amount to about $4 million, Brennan said.

The state loans, to be made to the Maryland Economic Development Corp., are to help with capital improvements at the $54 million, state-backed resort and provide working capital to cover such things as operating expenses and payroll.

Among improvements planned for the facility are an additional 8,000 square feet of meeting space, a portable enclosure for the outside portion of the resort's swimming pool to be used during the winter months, and upgrades to spa facilities and other hotel amenities including additional kitchen and storage space.

The additional meeting space is slated for completion in June next year, Brennan said. The pool enclosure would be ready for use next winter.

For months, MEDCO and the Rocky Gap bondholders have been working on a deal that would provide stabilization for the project.

Rocky Gap has lost $18.9 million since 1999. The resort lost $5.5 million in the fiscal year that ended June 30, 2002, compared with a $3.5 million loss the previous year, according to a recent report by the state Department of Legislative Services.

The report also revealed that Rocky Gap's liabilities outstripped its assets by $6.4 million at year's end, a sixfold increase from the prior year, while revenue fell 9.3 percent.

In February, Hans F. Mayer, executive director of MEDCO, said he thought it would require three more years to stabilize the project. Yesterday, he said he was not ready to change that projection.

In the past, reserve accounts have been tapped to make the scheduled interest payments, state officials said.

"The bondholders have once again affirmed their belief in the project, and so has the state," Mayer said in an interview.

"We're now at a point where we think we have the right manager, the right plan and the right project, and we expect success. ... We've already started showing signs of doing real well."

Consultants who studied the project recommended that the resort be promoted to the group destination resort business - primarily company, governmental and institutional conferences.

Mayer said the additional meeting space would help land more group business.

"Once we got past two groups at the place at the same time, we started having trouble maneuvering them around," he said.

Conceived as an economic development engine to bring tourists to an area of high unemployment, the resort received funding in 1996 when MEDCO issued $31.1 million in revenue bonds and the state kicked in $16.4 million. It opened in April 1998.

Rocky Gap has a 220-room hotel, restaurant, conference center and an 18-hole Jack Nicklaus-designed golf course nestled in the mountains of Western Maryland beside Interstate 68. Its main proponent was then-House Speaker Casper R. Taylor Jr., an Allegany County Democrat who saw it as an economic boon for his constituents.

Supporters believed the resort's golf course alone would attract people from around the world. But Rocky Gap has faced several obstacles, including a delay in the opening of the golf course and changes in management companies. A year ago, it hired its third and current management company.

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