UPDATE 1-CrossHarbor to be Yellowstone "stalking horse"

(Adds details on similar bankruptcy, quote, byline)

By Phil Wahba

NEW YORK, March 9 (Reuters) - CrossHarbor Capital Partners LLC said Monday a federal bankruptcy court in Montana has approved the investment firm as the "stalking horse" bidder in the bankruptcy auction of the exclusive Yellowstone Mountain Club LLC ski and golf community.

A "stalking horse" makes the lead bid at a bankruptcy auction and creates a floor for the bidding, in exchange for certain protections that often include break-up fees.

Boston-based CrossHarbor, which specializes in distressed real estate assets, said in a statement it was bidding about $100 million for Yellowstone Club's equity and debts, and would provide at least $75 million in additional capital to Yellowstone.

Yellowstone Club, part luxury resort, part residential community for the ultra-wealthy, is located near Big Sky, Montana and Yellowstone National Park.

It filed for Chapter 11 bankruptcy protection in November, showing how the financial crisis hitting the real estate and leisure industries is also hurting the higher end of the market.

Last week, another luxury resort property club, San Francisco-based Solstice LLC, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in the Southern District of New York, listing assets of up to $1 million and debts of up to $100 million

Solstice gives members access to luxury properties, including top ski resorts in Aspen, Colorado, and villas in Florence, Italy, for upfront fees of up to $1.95 million down and annual dues of $86,000, according to its website.

"The whole premise of destination clubs leaves people exposed," said Heidi Sorvino, head of the New York bankruptcy practice for Smith, Gambrell & Russell LLP.

"You pay $250,000 for the right to use a house somewhere and you still have no rights. You're an unsecured creditor. I'd rather take a quarter of a million dollars and stay at the Four Seasons for the rest of my life."

Yellowstone's website advertises condominiums with access to private ski areas for up to $8.75 million and customized residences going for $16 million.

In its bankruptcy filing, Yellowstone Club listed assets and liabilities of between $100 million and $500 million.

The cases are in Re: Yellowstone Mountain Club LLC, Case No.08-61570-11, U.S. Bankruptcy Court, District of Montana, and in Re: Solstice LLC, 09-11010, U.S. Bankruptcy Court, Southern District of New York. (Reporting by Phil Wahba, additional reporting by Chelsea Emery; editing by Maureen Bavdek and Andre Grenon)