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Credit Suisse's 'Predatory' Loans

May 13, 2009

A bankruptcy judge has used the word "predatory" to describe Credit Suisse's lending to several high-end golf developments and decided it will lose its place in the list of creditors hoping for money from Montana's bankrupt Yellowstone Club. Bloomberg has a report about it here.

The judge, Ralph Kirscher, didn't disguise his disdain for Credit Suisse's lending practices. "The naked greed in this case combined with Credit Suisse's complete disregard for the debtors or any other person, shocks the conscience of this court," he wrote.

The bank lent Yellowstone $375 million in 2005. Founders Tim and and Edra Blixseth used more than $200 million of the money for their personal use, according to yesterday's ruling. Yellowstone's finances deteriorated from there and it sought bankruptcy protection last year. It is to be sold at auction today.

Bloomberg reports that Credit Suisse banker Jeff Barcy and Tim Blixseth flipped a coin to decide the interest rate on that $375 million loan. (Blixseth won, getting a rate of just 2 percent.)

Credit Suisse made loans to several similar developments, including Tamarack Resort in Idaho, Promontory in Utah and Lake Las Vegas. All are in bankruptcy or default. "If the foregoing developments were anything like this case, they were doomed to failure once they received their loans from Credit Suisse," Kirscher wrote.

For a thorough, interesting report on the Credit Suisse loan fiasco, have a look at this earlier Bloomberg article.

-- P.F.