Tuesday, September 12, 2006

Chapman Capital Takes Some Sunterra (SNRR) Gains Off The Table

In an amended 13D filing on Sunterra Corp. (OTC: SNRR) Chapman Capital disclosed a 5.9% stake in the company. This is down from the 8.4% stake the firm disclosed in a past filing. Chapman said based on equity and M&A market conditions and valuation they determined it prudent to reduce their long market exposure to the Issuer.

In the new filing Chapman Capital said:

"On June 28, 2006, Mr. Chapman sent a critical letter to Mr. Gubbay and the Board of Directors of the Company. The correspondence, dated June 28, 2006, was attached as Exhibit B to the Original Schedule 13D. Throughout July and August 2006, Mr. Chapman communicated with the Issuer regarding the Reporting Persons' view that Messrs. James Weissenborn and Keith Maib be replaced with competent, experienced time share company executives. Moreover, Chapman Capital contacted numerous prospective candidates to replace Mr. Weissenborn as Chief Executive Officer of the Issuer, all of whom did not share with Mr. Weissenborn the condition of having "dirty hands" resulting from serving as a director of the Issuer during the period covering the Issuer's alleged accounting and tax improprieties. Chapman Capital believes that the Issuer has made significant progress toward the goal of Mr. Weissenborn being replaced by an executive better suited professionally and ethically for the Chief Executive Officer position with the Issuer.

Based on equity and M&A market conditions, and recent changes in comparable valuations for the Issuer's common shares in particular, the Reporting Persons determined it prudent to reduce their long market exposure to the Issuer."

In the original filing in June, Chapman Capital called for a sale of Sunterra's European business and said the company should also explore the full scale auction of the Company in its entirety, which they estimated to be worth in excess of $14.00 per share. Shares of Sunterra were in the low $7s prior to Chapman's filing --- shares closed at $11.90 on Tuesday. Today's filing showed Chapman sold stock between $11.22 and $12.47 in August and September.

In July, Chapman was joined by Daniel Loeb's Third Point LLC in its activist stance on Sunterra, which disclosed a 9.8% stake and also demanded the company be put up for sale. Third Point has not provided an updated stake in Sunterra.

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