Inside Simad’s $448M bankruptcy auction

When Ohel Children’s Home and Family Services made an offer to buy Camp Lavi in the Poconos, it unleashed a firestorm from parents, alumni and members of the Modern Orthodox community — and exposed an unusual complication in the bankruptcy sale of a sprawling summer camp empire.

Nearly 200 emails and letters were sent to the U.S. Bankruptcy Judge Christine Gravelle in New Jersey this summer, asking the judge to keep Camp Lavi “ours” and consider bidders other than Ohel, who they feared would shut down the camp. 

“What makes Camp Lavi so special cannot be measured on a balance sheet,” a parent wrote in an email.  

A Change.org petition went up with over 4,500 signatories to “Save Camp Lavi.”

“Camp Lavi is more than a camp — it is a second home to over 600 children every summer and a cherished Jewish community that has shaped the lives of thousands of families for generations. Today, that home is at risk. To Ohel: Don’t grow your family by destroying ours,” the petition said. 

Camp Lavi’s dilemma presented the bankruptcy court with an unusual challenge. In bankruptcy, debtors are expected to sell assets to the highest and best bidder with the goal of paying back creditors. But this was no ordinary restructuring. The properties were also summer camps with generations of alumni, fiercely loyal parents and operators who viewed themselves as stewards of institutions rather than merely bidders for land. That forced the restructuring team to navigate a factor rarely found on a balance sheet: emotion.

“Usually the larger cases like this are about economics, they’re about financial pressures and creditors and how do we pay everybody and how do we do the best job here,” said Gravelle during a hearing announcing the auction results on Aug. 10.

Simad and its 30 summer camps were thrust into bankruptcy when it defaulted on $214 million in Israeli bond payments in May, and Simad revealed about $34 million was diverted to companies controlled by the founders, David and Michael Shabsels. Attorneys and restructuring officer Asaf Ravid took control of Simad and sought to sell the camps through bankruptcy to repay creditors. 

But the pleas from parents didn’t change the debtors’ fiduciary duty: create a market for 30 highly idiosyncratic properties and maximize recovery for creditors. A camp portfolio of Simad’s size had never hit the market, according to two sources familiar with the matter. And, remarkably, the restructuring pros appear to have done that — the $448 million expected proceeds from 27 camps came close to the $466 million appraised value for all 30.

“The marketing and sale process for the Simad debtors’ camp businesses was unlike any other sale process in which I have participated,” wrote J. Scott Victor of SSG Capital Advisors in a declaration in bankruptcy court.

Bankruptcy

Cole Schotz’s Michael Sirota received a phone call from an attorney in Israel between 3 and 4 a.m. asking if he could file upward of 200 bankruptcy cases in 24 hours, according to a hearing in bankruptcy court.

The Shabselses’ camp and real estate empire had collapsed with no warning. The brothers raised $200 million in December from the Israeli bond market and had received a blessing of an investment-grade rating by the ratings agency Midroog.

Sirota learned in addition to the 30 camps, the Shabseles also owned 55 non-camp properties through an LLC known as Damis, which included a water park in New York. Both Simad and Damis split their real estate into two entities, a property company and a land company, leading to about 200 entities controlled or partially owned by the brothers. 

Sirota, a white shoe lawyer who helped restructure the upscale kitchen supply store Sur La Table, joined a team with newly appointed restructuring officer Asaf Ravid, an Israeli best known for completing the restructuring of Yoel Goldman’s All Year Holdings, to take control of Simad. Victor, a veteran of bankruptcy and distressed deals, is a former bankruptcy attorney who has been inducted into the Turnaround, Restructuring and Distressed Investing Hall of Fame. 

Sirota said the situation was urgent. About 20,000 children across the East Coast were about to get on buses to head to their camps.

“There was the need for an immediate call to action, and it was apparent that the Simad debtors would not be able to satisfy their funded debt obligations without the benefits of a Chapter 11 to avoid potentially catastrophic impacts on the summer camp season,” said Sirota, at a hearing in bankruptcy court on Aug. 10. 

The nuances of the Simad camp portfolio were complex. A portion of the Simad camps had partners and others were owned outright. Some, including Kiwi Country Day, were tied up in litigation, and every camp had different permitted uses and development potential. In the end, Victor was tasked with creating 30 separate sales pitches. Dealing with multiple creditor groups with different agendas was another issue, according to a court hearing and filings in bankruptcy court.

Ravid and Victor were working about 18 hours a day.

The biggest question mark was the value of the camps. In December, an appraisal from Leitner Berman valued the 30 camps at $466 million with a cap rate of 10.5 percent. The camps were profitable, according to the appraisal. However, the actual market was untested. Camp sales were usually private sales, not portfolio deals in bankruptcy auctions with competitive bidding. 

“You couldn’t find any report from anybody on what these [camps] were going for,” said a source familiar with the matter.

Summer camps presented unique obstacles: Prospective bidders could not tour the camps freely because they were in session, the debtors could not just evaluate bids on “headline price” alone and parents of campers were vocal, Victor said in a declaration in bankruptcy court. Groups affiliated with Camp Echo and Camp Lavi were especially concerned about bids from Ohel, a Jewish children’s mental health nonprofit, buying their camps, shutting them down and using the properties for Ohel’s operation.

“The outcome of this sale will affect far more than just the property — it will affect an entire community that has been built over generations,” said a Camp Echo parent in an email to the judge’s chambers. 

In the end, the camps received 58 bids, of which 51 were qualified. Four camps — Pine Forest, Camp Achim, Camp Chen-A-Wanda and Camp Mesorah — sold through private sales for about $71.7 million. 

Prior to the auction, four camps received stalking horse bids, which provided a floor for the offers. Twenty-three camps were put up for auction, and each one was sold by different collateral pools. The Israeli bonds, backed by 16 camps, went first. Next, the properties backing the Bank of New Hampshire went up for sale, and then other lenders. 

Bidders gathered in virtual breakout rooms for the sale of individual camps for nearly 48 straight hours on July 28. The auction started at noon and went till 2 a.m each day. Victor ripped heaters throughout.

“The truth be told, if Mr. Victor didn’t need to smoke a cigarette during every bidder’s request for a break, we probably could have saved a few hours, but my sense of it is he used that as a strategy to drive up value at the expense of his own personal health,” said Sirota during the Aug. 10 hearing. 

When the two-day, emotionally charged auction ended, a portfolio bid phase ensued, where bidders could submit offers on at least three properties so that the debtors could see whether greater value could be achieved through the sale of multiple camps as opposed to a single sale.

One source familiar with the matter said the high sales price of Camp Mohawk changed the math for the portfolio bids. In the auction, Camp Mohawk sold for $120.8 million to investment firm FitzWalter Capital Partners, compared with the stalking horse bid of $68 million from a company affiliated with Warner Bros CEO David Zaslav. But FitzWalter’s bid came in high enough to knock off portfolio bidders. This allowed other camps to be sold to existing camp operators and directors. 

The auctions resulted in only a few objections. A group of Camp Lavi parents initially contested Ohel’s winning bid but ultimately withdrew its objection.

And despite the fears that prompted hundreds of parents and alumni to appeal to the bankruptcy court, Camp Lavi is expected to remain a summer camp. Ohel agreed to sell the property to a for-profit group led by former Camp Lavi director Joey Hoenig, who has said he plans to continue operating it as a Modern Orthodox camp, according to eJewishPhilanthropy.

“Throughout these discussions, one principle became paramount to us: whatever path we pursued, Camp Lavi must remain Camp Lavi,” Ohel wrote in a statement. 

Gravelle approved the sales at the hearing on Aug. 10.  She acknowledged this bankruptcy was different from others and thanked the parents for writing to the judge’s chambers to express their concerns. 

“Here, when you talk about the camp legacies, that’s huge,” Gravelle said.