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Restructuring

Covid-19 Another Hazard for Golf Course Owners

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Published: September 17th, 2020
Effects from the Covid-19 pandemic may push more struggling golf courses to file for Chapter 11 protection.

Bankruptcy and restructuring professionals say golf course businesses that may have been struggling to compete against other courses and golf facilities have been pushed over the edge into Chapter 11 by the effects of the Covid-19 pandemic.

Golf courses have struggled over the past 15 years from an oversupply as a result of a boom in course development from 1986 to 2005, when about 4,500 courses were built in the U.S. The industry had 16,693 courses, with another 14,613 other golf-related facilities such as driving ranges, golf simulators and golf experience centers such as TopGolf or Drive Shack, according to a 2018 National Golf Foundation report.

Golf course closures have outweighed openings since 2006 in the U.S. The foundation reported that 12.5 new 18-hole courses opened in 2018, while 198.5 closed. It estimated 24.2 million people played golf courses averaging 17.9 rounds.

The news isn’t all bad for the golf industry, though, as it has had a brief uptick since the Covid-19 outbreak, according to the National Golf Foundation. Rounds of golf increased in July by 20% year over year and were 14% higher in June than the same period in 2019. The year-end forecast estimates a 2% to 6% increase in rounds over the past year.

Nevertheless, the substantial market correction already had affected many golf courses when the coronavirus pandemic forced shutdowns and pushed some of the businesses into bankruptcy.

For example, Arklow LP, which owns the International Golf Club in Bolton, Mass, filed for Chapter 11 on May 4 in the U.S. Bankruptcy Court for the District of Massachusetts in Worcester. Chief restructuring officer Craig Jalbert of Verdolino & Lowery PC in a declaration said the Covid-19 outbreak had forced the golf course to cease operations, which severely affected its working capital.

The glut of courses forced the golf club in 2008 to modify its membership model by eliminating a $65,000 deposit for members and requiring only an $8,000 annual dues payment. Despite the change in its membership fees, the club’s membership requests continued to decline, resulting in a severe reduction in cash flow.

The club has 39 active deposit members and 100 nondeposit members. The combination of declining membership revenue and closure from the pandemic forced it to file a petition.

Changing industry demographics have had a major effect on golf course revenue, according to restructuring and litigation attorney Patrick Dinardo of Sullivan & Worcester LLP.

Editor’s note: The original version of this article, including additional details, was published earlier on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.

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