Diablo Grande gets OK for financing extension

Diablo Grande won approval for two more weeks of interim financing from U.S. Bankruptcy Court this week to keep the resort community operating.

The resort's managers are scheduled to be back in the Modesto court April 16 seeking court approval of longer-term financing and a plan to work out of bankruptcy, according to vice president of development Dwain Sanders.

Diablo Grande, a golf resort development in the hills west of Patterson in Stanislaus County, filed for Chapter 11 reorganization bankruptcy protection March 10. Chapter 11 protects a business from its creditors while it develops a plan to work itself out of debt.

The development struggled with cash flow problems when the housing market collapsed, and briefly closed the two championship-level golf courses earlier this year.

The bankruptcy filing shows $54.65 million in liabilities, including $20.4 million to the Bank of Scotland, more than $10 million to limited partners of the partnership that owns the development, $1.8 million in taxes to Stanislaus County and $900,000 to Oak Valley Community Bank.

A $5 million liability to Stanislaus County also is listed for the construction of a permanent fire station, due when the number of construction permits reaches 501.

Headed by pharmaceutical entrepreneur Donald Panoz, Diablo Grande's investors have poured more than $120 million into the project over 20 years, working through 21 lawsuits challenging water supply and environmental issues, obtaining water rights from a Kern County water district and building a road to the remote site.

The development finally began building houses in 2003, but the housing market woes caught up with the resort in the last year.

The 33,000-acre development includes 400 houses, the two golf courses, vineyards and a winery. Plans called for a resort hotel and convention center, retail stores, a spa and tennis club, and 2,300 homes.

The partnership is seeking a buyer for Diablo Grande and has listed the property at $150 million.

Sanders said potential buyers were visiting the property Thursday and another group was due Monday. "Everything is moving in a positive direction," he said.

Bee staff writer Tim Moran can be reached at tmoran@modbee.com or 578-2349.