Operations of Far & Wide Draw Bids

A number of buyers last week moved to pick up pieces of bankrupt Far&Wide Corp., with more expected to emerge this week.

By: Lisa Jennings

A number of buyers last week moved to pick up pieces of bankrupt Far&Wide Corp., with more expected to emerge this week.

As competitors jumped in with offers to rescue stranded Far&Wide travelers, attorneys continued to battle over the Miami-based holding company, which owes secured creditors more than $75 million.

Another $60 million is owed to unsecured creditors, who according to court filings, are not expected to be repaid.

In California, Attorney General Bill Lockyer last week ruled that the state’s $2.6 million consumer protection fund would not cover Far&Wide companies because the holding company is based in Miami.

As sellers of travel, agents in California may be held responsible for their clients’ deposits on Far&Wide trips that were canceled, unless they provide written documentation within 30 days that the money had been sent to the tour operator. (For more information, www.artaonline.com.)

An official with the fund said it appears that two of Far&Wide’s companies are members and may be subject to claims in the state. Claims could add up to more than $1 million.

With an estimated 15,000 current and future travelers affected and about $30 million in bookings, the bankruptcy case is expected to rekindle an ongoing debate about the effectiveness of consumer protection plans. The topic is on the agenda for an Oct. 9 board meeting of the U.S. Tour Operators Association.

Far&Wide attorney John Monaghan, of Holland & Knight LLP, said last week that company officials were trying to keep the company operating long enough to negotiate the sale of as many of the tour operator units as possible.

Last week the court approved a bare-bones budget for continuing operations through this week.

But in a Sept. 29 hearing, Far&Wide’s most senior secured creditor, Ableco Finance LLC, asked the court to convert the company’s Chapter 11 filing for protection from creditors into a Chapter 7 liquidation.

The request was initially denied last week, but may be renewed, said Monaghan.

Ableco Finance, a subsidiary of Cerberus Capital Management, is owed more than $9 million by Far&Wide. Ableco, a lender that Far&Wide approached for a loan last year, has a lien on company assets and, as the most senior creditor, has priority over others.

In an initial statement, Far&Wide said that eight of the company’s 21 brands would be reacquired by previous owners. As of Wednesday, four buyers had filed court documents seeking to buy some of the units. Monaghan said he expected one more to be filed last week and several more this week. Company officials were talking to 20 to 25 more potential purchasers, he said.

Some of potential buyers are former owners of the tour operations, including Ian Swain, founder of Swain Australia, who is negotiating to buy Downunder Direct; Pacific Bestours; Swain India Tours; Swain Africa Tours; and Swain Tahiti Tours, as well as the management of United Vacations Pacific.

Pacific Bestour’s former owner, Peter Yeung, has bid for a division of that company, as well as United Vacations Asia. David Herbert sought to buy African Travel, which he founded, as well as Lion World in Canada. Herbert and Swain are running the companies with their own money while waiting for the court to rule. Bids also were expected for High Country Passage, Adventure Center and Grand European Tours.

Far&Wide has a $1 million bond with the tour operator association. Bob Whitley, the association’s president, said the last major bankruptcy of a tour operator Kingdom Vacations in 2000 resulted in claimants being paid 45 cents on the dollar.

After that case, board members debated changing requirements but decided not to. Whitley predicted the same conclusion this week.

“We have a $1 million bond and no one has anything better out there in the industry,” said Whitley. “Without it, there would be total chaos.”