ITEM 1A. RISK FACTORS



BFC Financial Corporation Risks

BFC and its subsidiariesWe are subject to various risks and uncertainties relating to or arising out of the nature of theirour businesses, operations and investments, and general business, economic, financing, legal, regulatory, and other factors and conditions. New risk factors emerge from time to time and it is not possible for management to either predict all risk factors or assess the impactall potential impacts of any factor, or combination of factors, on BFCBBX Capital Corporation or its subsidiaries, including with respect to their operations, results and financial condition. 



BFC has in the past incurred cash flow deficits at its parent company level and will relyBBX Capital relies on dividends from its subsidiaries in the future.Bluegreen to fund operations.



BFC is engagedBBX Capital has relied and continues to rely primarily on dividends from Bluegreen in making investments in operating businesses. Historically, BFC, at its parent company level, has not had revenue generating operating activities and has incurred cash flow deficits. BFC has financed operating cash flow deficits, andorder to fund its operations and investments with available working capital, issuances of equityinvestments. Dividends from Bluegreen may not be paid to BBX Capital to the extent previously paid or debt securities,when anticipated or at all. Bluegreen paid dividends from its subsidiariestotaling $54.4 million during 2015 and borrowings. As of December 31, 2015, BFC has $10.0$70.0 million available under the Loan and Security Agreement entered into during July 2015 which allows for borrowings by the company of up to $10 million on a revolving basis.  In addition, the2016. The payment of dividends by BBX Capital requires the declaration of such dividend by BBX Capital's board of directors; a majority of whom are independent under the listing standards of the -NYSE and, accordingly, such decisionBluegreen is not in BFC's control. Further, declaration of dividends by Bluegreen to Woodbridge are subject to the approval of Bluegreen’s Board of Directorscompliance with financial covenants under its credit facilities and certain of Bluegreen's credit facilities contain terms which may limit the payment of cash dividends without the lender's consent or waiver. Decisions with respect to dividends by BBX Capital and Bluegreen are generally based on, among other things, the applicable company'sBluegreen's operating results, financial condition, cash flow, and liquidity needs. BFC relies on dividends from WoodbridgeDividend payments to BBX Capital by any of its subsidiaries, including Bluegreen, could, in order to fund its current and future operations and investments; however, dividends by Woodbridge are dependent on the receipt of dividends from Bluegreen and arecertain circumstances, be subject to the approvalclaims made by creditors of the boards of directors of both BFC and BBX Capital.  Dividends from Woodbridge may not be paid to BFC to the extent or when anticipated or at all.such subsidiary.



If cash flow is not sufficient to fund BFC'sBBX Capital's liquidity needs or BFCBBX Capital otherwise determines it is advisable to do so, BFCBBX Capital might seek to liquidate some of its investments or seek to fund its operations with the proceeds of additional equity or debt financing. Such financing may not be available on commercially reasonable terms, if at all, and if BFCBBX Capital chooses to liquidate its investments, it may be forced to do so at depressed prices.



Adverse conditionsBBX Capital’s acquisitions may reduce earnings, require it to obtain additional financing and events where BFC’s investments are currently concentrated or in the industries in which its subsidiaries operate could adversely impact its results and future growth.

BBX Capital's real estate related operations, activities and investments are concentrated in Florida.  Adverse economic conditions, natural disasters, including tropical storms and hurricanes, which are a permanent risk in Florida, or adverse changes in laws or regulations applicableexpose it to BFC or the companies in which BFC holds investments have in the past adversely impacted and may in the future adversely impact BFC's operating results and financial condition.additional risks.



BFCBBX Capital’s business strategy includes investments in or acquisitions of operating companies, such as its acquisitions of Renin Corp. and its subsidiaries may issue additional securities and incur additional indebtedness.

If BFC's cash flow is not sufficient to meet its liquidity needs and investment objectives or BFC's boardthe acquisitions of directors otherwise determines it to be appropriate, BFC may seek to raise fundsbusinesses by BBX Sweet Holdings in the future through the issuance of debt or equity securities. There is generally no restriction on BFC's ability to issue debt or equity securities which are pari passu or have a preference over its Class A Common Stockcandy and Class B Common Stock, although the holders of BFC’s Class B Common Stock have special class voting rights under BFC’s Amended and Restated Articles of Incorporation with respect to certain securities issuances and other actions affecting BFC’s Class B Common Stock. Any such issuance, including shares issued in connection with any investment or acquisition which BFC makes in the future, may be dilutive to BFC's shareholders. In addition, any securities issuances in the future by a subsidiary of BFC may dilute BFC's economic investment or voting interest in that company.

Further, BFC and its subsidiaries have in the past and may in the future incur significant amounts of debt. Such indebtedness could have several important effects, including, without limitation, that BFC or its subsidiaries, as applicable, may be required to use available cash for the payment of principal and interest due on its debt, that outstanding indebtedness and leverage will impact the liquidity of BFC or its subsidiaries, as applicable, and that outstanding indebtedness will increase the impact which negative changes in general economic and industry conditions may have on BFC or its subsidiaries.

BFC faces risks and uncertainties with respect to any acquisitions which it or its subsidiaries pursue in the future and there is no assurance that its investments will generate income or that BFC will exit any of its investments for a profit.

BFC has in the past focused and continues to focus on providing strategic support to its existing investments with a view to the improved performance of the organization as a whole. However, BFCconfections industry.  BBX Capital may also seek to make opportunistic investments outside of its existing portfolio, includingportfolio. Some of these investments in real estate based opportunities and middle market operating businesses.acquisitions may be material. While BFC will seekBBX Capital is seeking investments and acquisitions primarily in companies that it believes will provide opportunities for growth, BFCit may not be successful in identifying these opportunities. Investments or acquisitions that BFC does makeit completes may not prove to be successful or even if successful may not initially generate income, or may generate income on an irregular basis or over a long time period, which would cause BFC'speriod. Accordingly BBX Capital’s results of operations tomay vary significantly on a quarterly basis and from year to year. Acquisitions may expose BFC to additional risks and may have a material adverse effect on its results of operations. Any acquisition made may fail to accomplish the strategic objectives hoped or otherwise not perform as expected or adversely impact BFC's financial condition or operating results. In addition, BFC from time to time may consider transactions involving the sale of its subsidiaries or investments or other transactions which would result in a decrease in BFC’s ownership interest in its subsidiaries, and there is no assurance that any such transactions, if pursued and consummated will generate a profit or otherwise be advantageous to BFC. Acquisitions and investments will also expose BFC,BBX Capital, or increase BFC’sBBX Capital’s exposure in the case of acquisitions of or additional investments in its portfolio companies, to the risks of any business acquired or invested in.Acquisitions entail numerous risks, including:

BBX Capital may not be able to acquire or profitably manage additional businesses, or to integrate successfully any acquired businesses, including Renin and the businesses BBX Sweet Holdings acquired, without substantial costs, delays or other operational or financial difficulties, including difficulties in integrating information systems and personnel and establishing control environment processes across acquired businesses.  The failure to do so could have a material adverse effect on its business, financial condition and results of operations.  In addition, to the extent that operating businesses are acquired outside the United States or the State of Florida, there will be additional risks

related to compliance with foreign regulations and laws including tax laws, labor laws, currency fluctuations and geographic economic conditions.



In addition, there is significant competition for investments and acquisitions, which could increase the costs associated with the investment or acquisition.  Substantial costs are incurred in connection with the evaluation of potential acquisition and investment opportunities whether or not the acquisition or investment is ultimately consummated. Further, funding such investments or acquisitions may rely on additional debt or equity financing, which will subject BFCBBX Capital to the risks and uncertainties described in the precedingthese risk factor.factors. If BFCBBX Capital requires additional financing in the future, the financing may not be available when needed or on favorable terms, if at all. Additionally, BFCBBX Capital does not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation or by BFC’sBBX Capital’s Amended and Restated Articles of Incorporation or Bylaws.



Substantial salesIn addition, BBX Capital from time to time may consider transactions involving the sale of BFC’s Class A Common Stockits subsidiaries or Class B Common Stock could adversely affect the market prices ofinvestments or other transactions which would result in a decrease in BBX Capital’s ownership interest in its subsidiaries, and there is no assurance that any such securities.transactions, if pursued and consummated, will generate a profit or otherwise be advantageous to BBX Capital.



Substantial sales of BFC’s Class A Common StockWe may issue additional securities and incur additional indebtedness at BBX Capital or Class B Common Stock, including sales of shares by controlling shareholders and management, or shares issued in connection with any investments or acquisition that BFC makes in the future, could adversely affect the market prices of such securities. Management has in the past andits subsidiaries.

BBX Capital may in the future enter into Rule 10b5-1 plans pursuantseek to which a significant numberraise funds through the issuance of shares are sold into the open market.

Alan B. Levan and John E. Abdo's control position may adversely affect the market price of BFC's Class A Common Stock and Class B Common Stock.

Alan B. Levan, the former Chairman and Chief Executive Officer of BFC, and John E. Abdo, the current Vice Chairman of BFC, and their respective affiliates currently collectively beneficially own shares of BFC's Class A Common Stock and Class B Common Stock representing approximately 63% of the general voting power and approximately 24% of the total outstanding common stock of BFC. These shares consist of 11,291,413 shares,debt or approximately 15%, of BFC's Class A Common Stock and 10,416,386 shares,equity securities. There is generally no restriction on BBX Capital’s ability to issue debt or approximately 76%, of  BFC's Class B Common Stock. In addition, each has been granted restrictedequity securities which vestare pari passu or have a preference over time.  Messrs. Levan and Abdo are parties to an agreement pursuant to which Mr. Levan has agreed to vote his shares of BFC's Class B Common Stock in favor of the election of Mr. Abdo to BFC's board of directors for so long as he is willing and able to serve as a BFC director. Additionally, Mr. Abdo has agreed to vote the shares of BFC's Class B Common Stock he owns in the same manner that Mr.

Levan votes his shares of BFC's Class B Common Stock. Mr. Abdo has also agreed, subject to certain exceptions, not to transfer certain of his shares of BFC's Class B Common Stock and to obtain the consent of Mr. Levan prior to the conversion of certain of his shares of BFC's Class B Common Stock into shares of BFC's Class A Common Stock. Because BFC's Class A Common Stock and Class B Common Stock vote as a single class on most matters, Messrs. Levan and Abdo effectively have the voting power to elect the members of BFC's board of directors and to control the outcome of any other vote of BFC's shareholders, except in those limited circumstances where Florida law mandates that the holders of BFC's Class A Common Stock vote as a separate class. Messrs. Levan and Abdo's control position may have an adverse effect on the market price of BFC'sits Class A Common Stock and Class B Common Stock. In addition, their interestsAuthorized but unissued shares of BBX Capital’s capital stock are available for issuance from time to time at the discretion of BBX Capital’s board of directors, and any such issuance may conflict with the interests of BFC's otherbe dilutive to BBX Capital’s shareholders.



The loss of the services of BFC's key management and personnel could adversely affect its business and the businesses of its subsidiaries.

BFC's ability to successfully implement its business strategy will depend on its ability to attract and retain experienced and knowledgeable management and other professional staff. BFC may not be successful in attracting and retaining key management personnel. Our business operations could be adversely affected if we are unable to retain and motivate our existing employees and attract new employees as needed. In addition, as described in further detail in “Item 3 – Legal Proceedings”, the jury in the SEC action againstFurther, BBX Capital and Alan B. Levan found that BBX Capital and Alan B. Levan committed violations of federal securities laws, which included a two year bar on Mr. Levan serving as an officer or director of a public company. While BBX Capital and Mr. Levan appealed the adverse judgment to the Eleventh Circuit Court of Appeals, the results of appellate review are uncertain, and BFC, BBX Capital and theirits subsidiaries may be adversely impacted by the loss of services of Mr. Alan Levan as BFC’s and BBX Capital’s Chairman and Chief Executive Officer.   Mr. Alan Levan resigned as BFC’s and BBX Capital’s Chairman and Chief Executive Officer on December 23, 2015.  Jarett Levan, a director and Executive Vice President of BFC and a director and President of BBX Capital has been appointed acting Chairman and Chief Executive Officer of BFC and BBX Capital.  In addition, John E. Abdo, continues to serve as Vice Chairman of BFC and BBX Capital.

Provisions in BFC's Amended and Restated Articles of Incorporation and Bylaws, as well as BFC's shareholder rights plan, may make it difficult for a third party to acquire BFC and could impact the price of BFC's Class A Common Stock and Class B Common Stock.

BFC's Amended and Restated Articles of Incorporation and Bylaws contain provisions that could delay, defer or prevent a change of control of BFC or its management. These provisions could make it more difficult for shareholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of BFC's Class A Common Stock or Class B Common Stock. These provisions include:

In addition, BFC currently has in place a shareholder rights plan which is designed to preserve certain tax benefits available to BFC. However, because the rights plan provides a deterrent to investors from acquiring a 5% or greater ownership aggregate interest in BFC's Class A Common Stock and Class B Common Stock, it may have an anti-takeover effect.

BBX Capital's Restated Articles of Incorporation and Amended Restated Bylaws contain similar provisions as those described above. BBX Capital also has a shareholder rights plan similar to BFC’s with respect to the acquisition of more than 5% of BBX Capital’s Class A Common Stock. See "Risks Related to BBX Capital.”

Dividends and distributions from BFC’s subsidiaries to their respective parent companies may be subject to claims in the future from creditors of the subsidiary.

Subsidiaries have in the past and may in the future make dividends or distributions to their parent companies. During 2014 and 2015, Bluegreen paid dividends totaling $71.5 million and $54.4 million, respectively, to its parent company, Woodbridge, and Woodbridge paid dividends totaling $37.3 million and $28.0 million, respectively, to BFC and $31.8 million and $23.8 million, respectively, to BBX Capital.  Dividend payments and other distributions by a subsidiary to its parent company may, in certain circumstances, be subject to claims made by creditors of the subsidiary which made the payment or distribution. Any such claim, if successful, may have a material adverse impact on the financial condition of the parent company against which the claim was brought.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP. Any changes in estimates, judgments and assumptions used could have a material adverse effect on BFC’s financial position and operating results.

The consolidated financial statements included in the periodic reports BFC files with the SEC, including this Annual Report on Form 10-K, are prepared in accordance with GAAP. The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reportedincur significant amounts of assets (including goodwill and other intangible assets), liabilities and related reserves, revenues, expenses and income. This includes estimates, judgments and assumptions for assessing the amortization/accretion of purchase accounting fair value differences and the future value of goodwill and other intangible assets pursuant to applicable accounting guidance. BFC bases its estimates on historical experience and on various other assumptions that BFC believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, estimates, judgments and assumptions are subject to changedebt, including at Bluegreen. Any indebtedness, including indebtedness incurred in the future and BFC's estimates, judgments and assumptions may prove to be incorrect and BFC's actual results may differ from these estimates under different assumptionscould have several important effects on BBX Capital or conditions. If any estimates, judgmentsits subsidiaries, including, without limitation, that BBX Capital or assumptions change in the future, or BFC's actual results differ from BFC's estimates or assumptions, BFCits subsidiaries may be required to record additional expenses or impairment charges, which would be recorded as a charge against its earningsuse available cash for the payment of principal and could have a material adverse impactinterest due on its financial conditiondebt and operating results.

BFC’s investment in BBX Capital is subject to equity pricing risks.

BBX Capital's Class A Common Stock is currently listed for trading on the NYSE. Because BBX Capital is consolidated in BFC's financial statements, the decline in the market price of BBX Capital's Class A Common Stock would not impact BFC's consolidated financial statements. However, the market price of BFC's Class A Common Stock and Class B Common Stock, which is important to its valuation and ability to obtain equity or debt financing, would likely be adversely affected by a decline in the market price of BBX Capital's Class A Common Stock. The market price of BBX Capital's Class A Common Stock is subject to a number of factors, many of which may be beyond the control of BBX Capital, including general economic trends and conditions. In addition, BFC's control position with respect to BBX Capital may have an adverse effect on the market price of BBX Capital's Class A Common Stock.

Certain members of BFC’s board of directors and certain of BFC's executive officers are also directors and executive officers of BBX Capital and directors of Bluegreen.

Jarett S. Levan, Acting Chairman, Chief Executive Officer and President of BFC, and John E. Abdo, BFC's Vice Chairman, are also directors and executive officers of BBX Capital. Mr. Abdo is also Chairman of Bluegreen.    Further, Seth M. Wise, an executive officer and director of the Company, and Raymond S. Lopez, an executive officer of the Company, are each executive officers of BBX Capital. The Company and BBX Capital own 54% and 46%, respectively, ofthat the outstanding equity interests in Woodbridge, which is the sole shareholder of Bluegreen.  None of BFC ‘s executive officers is obligated to allocate a specific amount of time to the management of BFC,indebtedness and they may devote more time and attention to the operations of BFC's affiliates than they devote directly to BFC's operations.

Pending legal proceedings and the impact of any finding of liability or damages could adversely impact BFC and its financial condition and operating results.

BFC and its subsidiaries are subject to the pending legal proceedings described in "Item 3 - Legal Proceedings," as well as proceedings that may arise from time to time.  The impact of any funding of liability or damages could adversely impact BFC and its financial condition and operating results.

BFC and its subsidiaries are subject to environmental laws related to their real estate activities and the cost of compliance could adversely affect the businesses of BFC and its subsidiaries.

As current or previous owners or operators of real property, BFC and its subsidiaries may be liable under federal, state and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not BFCleverage at BBX Capital or its subsidiaries knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial.

Information technology failures and data security breaches could harm our business.

The Company relies on information technology (IT) systems, including Internet sites, data hosting facilities and other hardware and platforms, some of which are hosted by third parties. These IT systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover, the Company’s computer systems, like those of most companies, may become subject to computer viruses or other malicious codes, and to cyber or phishing-attacks. Although administrative and technical controls have been implemented which attempt to minimize the risk of cyber incidents, computer intrusion efforts are becoming increasingly sophisticated,will impact liquidity, and any enhanced controls installed might be breached. If the IT systems cease to function properly, the Company could suffer interruptionsnegative changes in its operations. If the cyber-security is breached, unauthorized persons may gain access to the proprietary or confidential information of BFCgeneral economic and its subsidiaries, including information about borrowers, employees or investments. This could require the Company to incur significant costs to comply with legally required protocols and to repair or restore the security of its systems

Risks Related to Bluegreen

Bluegreen is subject to various risks and uncertainties relating to or arising out of the nature of its business and general business, economic, financing, legal and other factors orindustry conditions that may affect Bluegreen.  Moreover, Bluegreen operates in a very competitive, highly regulated and rapidly changing environment.  New risk factors emerge from time to time and it is not possible for management to either predict all risk factors, or assess the impact of all risk factors on Bluegreen’s business or the extent to which any factor, or combination of factors, may affect Bluegreen’s business. will increase such impact.



Bluegreen’s business and operations, including its ability to market VOIs, are subject to risks related tomay be adversely affected by general economic conditions and the availability of financing.



Bluegreen’s business is subject to risks related to general economic and industry conditions and trends.   Bluegreen’s results, operations and financial condition may be adversely affected by unfavorable general economic and industry conditions, such as high unemployment rates and job insecurity, declines in discretionary spending, declines in real estate values and the occurrence of geopolitical conflicts, including if these or other factors adversely impact the availability of financing for Bluegreen or Bluegreen’s customers or the ability of Bluegreen’s customers’ to otherwise pay amounts owed under notes receivable. Further, adverse changes affecting the vacation ownership industry, such as an oversupply of vacation ownership units, a reduction in demand for such units, changes in travel and other consumer preferences, demographic and vacation patterns, changes in governmental regulation of the industry, imposition of increased taxes by governmental authorities, the declaration of bankruptcy and/or credit defaults by other vacation ownership companies and negative publicity for the industry, could also have a material adverse effect on Bluegreen’s business. In addition, Bluegreen's operations and results may be negatively impacted if Bluegreen is unable to update its business strategy over time and from time to time in response to changing economic and industry conditions.



The vacation ownership and hospitality industries are highly competitive, and Bluegreen may not be able to compete successfully.

Bluegreen competes with various high profile and well-established operators, many of which have greater liquidity and financial resources than Bluegreen.  Many of the world's most recognized lodging, hospitality and entertainment companies develop and sell time-share units or VOIs in resort properties.  Bluegreen also competes with numerous smaller owners and operators of vacation ownership resorts.  Bluegreen's ability to remain competitive and to attract and retain customers depends on its customers' satisfaction with its products and services as well as on distinguishing the quality, value, and efficiency of its products and services from those offered by its competitors.  Customer dissatisfaction with experiences at its resorts or otherwise as a member of the Bluegreen Vacation Club, including due to an inability to use points for desired stays, could result in negative publicity and/or a decrease in sales, or otherwise adversely impact Bluegreen's ability to successfully compete in the vacation ownership and hospitality industries.  Bluegreen may not be able to timely and sufficiently identify and remediate the cause of customer dissatisfaction.  Any of these events could materially and adversely impact Bluegreen's operating results and financial condition.

Bluegreen would suffer substantial losses and Bluegreen’s liquidity position could be adversely impacted if the customers to whom Bluegreen provides financing default on their obligations.

Prior to December 15, 2008, Bluegreen did not perform credit checks on the purchasers of its VOIs in connection with Bluegreen’s financing of their purchases.  Effective December 15, 2008, Bluegreen implemented a FICO® score-based credit underwriting program.  Bluegreen enhanced this credit underwriting program starting in January 2010.  While Bluegreen’s loan portfolio originated after December 15, 2008 has to date experienced defaults at a lower rate than loans originated prior to that date, Bluegreen’s FICO® score-based underwriting standards may not continue to result in decreased default rates or otherwise result in the improved performance of Bluegreen’s notes receivable.  Adverse conditions in the mortgage industry, including credit availability, borrowers’ financial profiles, prepayment rates and other factors, including those outside Bluegreen’s control, may increase the default rates Bluegreen experiences or otherwise negatively impact the performance of its notes receivable.  Although in many cases Bluegreen may have recourse against a buyer for the unpaid purchase price, certain states have laws that limit Bluegreen’s ability to recover personal judgments against customers who have defaulted on their loans or Bluegreen may determine that the cost of doing so may not be justified.  Historically, Bluegreen has generally not pursued such recourse against its customers.  In the case of Bluegreen’s notes receivable secured by VOIs, if Bluegreen is unable to collect the defaulted amount due, Bluegreen traditionally has terminated the customer’s interest in the Bluegreen Vacation Club and then remarketed the recovered VOI.  Irrespective of Bluegreen’s remedy in the event of a default,

Bluegreen cannot recover the marketing, selling and administrative costs associated with the original sale and such costs generally exceed the cash received by Bluegreen from the buyer at the time of the sale.  In addition, Bluegreen will need to incur such costs again in order to resell the VOI.  If default rates for Bluegreen’s borrowers remain at current levels or increase, Bluegreen may be required to increase its provision for credit losses.  In addition, it may cause buyers of, or lenders whose loans are secured by, Bluegreen’s VOI notes receivable to reduce the amount of availability or advance rates under receivables purchase and credit facilities, or to increase the interest costs associated with such facilities.  In such an event, the cost of financing may increase and Bluegreen may not be able to secure replacement or alternative financing on terms acceptable to Bluegreen, if at all, which would adversely affect Bluegreen’s earnings, financial position and liquidity.

Under the terms of Bluegreen’s pledged and receivable sale facilities, Bluegreen may be required, under certain circumstances, to replace receivables or to pay down the loan to within permitted loan-to-value ratios.  Additionally, the terms of Bluegreen’s securitization transactions require Bluegreen to repurchase or replace loans if Bluegreen breaches any of the representations and warranties Bluegreen made at the time Bluegreen sold the receivables.  These agreements also often include provisions that in the event of defaults or delinquencies by customers in excess of stated thresholds, or if other performance thresholds are not met, will require substantially all of Bluegreen’s cash flow from its retained interest in the receivable portfolios sold to be paid to the parties who purchased the receivables from Bluegreen.

While Bluegreen has attempted to restructure its business to reduce its need for and reliance on financing for liquidity in the short term, there is no assurance that Bluegreen’s business and profitability will not be impacted by its ability to obtain financing, which may not be available on favorable terms, or at all. 

In connection with sales of VOIs, Bluegreen may offer financing to the purchaser of up to 90% of the purchase price of the VOI.  However, Bluegreen incurs selling, marketing and administrative cash expenditures prior to and concurrent with the sale.  These costs generally exceed the down payment Bluegreen receives at the time of the sale.  Accordingly, Bluegreen’s ability to borrow against or sell its notes receivable has historically been a critical factor in Bluegreen’s continued liquidity, and Bluegreen therefore has depended on funds from its credit facilities and securitization transactions to finance its operations.  If Bluegreen’s pledged receivables facilities terminate or expire and Bluegreen is unable to extend them or replace them with comparable facilities, or if Bluegreen is unable to continue to participate in securitization-type transactions and “warehouse” facilities on acceptable terms, Bluegreen’s liquidity, cash flow and profitability would be materially and adversely affected.  Credit market disruptions have in the past adversely impacted the willingness of banks and other finance companies to provide “warehouse” lines of credit for VOI receivables and resulted from time to time in the term securitization market being unavailable.  Future credit market disruptions may have similar effects or otherwise make obtaining additional and replacement external sources of liquidity more difficult and more costly.

In addition, financing for real estate acquisition and development and the capital markets for corporate debt is cyclical.  In response to changing conditions, during 2008, Bluegreen adopted initiatives, which included limiting sales and encouraging higher down payments on sales, in an attempt to conserve cash.  Bluegreen also increased its focus on expanding its fee-based service business.  However, there is no assurance that these initiatives will enhance Bluegreen’s financial position or otherwise be successful in the long term. 

Notwithstanding the initiatives implemented by Bluegreen to improve its cash position, Bluegreen anticipates that it will continue to seek and use external sources of liquidity, including funds that Bluegreen obtains pursuant to additional borrowings under its existing credit facilities, under credit facilities that Bluegreen may obtain in the future, under securitizations in which Bluegreen may participate in the future or pursuant to other borrowing arrangements, to:

Bluegreen’s ability to service or refinance its indebtedness or to obtain additional financing (including its ability to consummate future term securitizations) depends on the credit markets and on Bluegreen’s future performance, which is subject to a number of factors, including the success of Bluegreen’s business, Bluegreen’s results of operations, leverage, financial condition and business prospects, prevailing interest rates, general economic conditions, the performance of Bluegreen’s receivables portfolio, and perceptions about the vacation ownership and real estate industries. Further, reputational and other risks to both the lender and to Bluegreen associated with the

2007 bankruptcy of Levitt and Sons, LLC, a former wholly owned homebuilding subsidiary of Woodbridge, and the adverse jury verdict in the litigation brought by the SEC against BBX Capital and its former Chairman, Alan B. Levan, who was also Chairman of Bluegreen until December 2015 may be considered by lenders in connection with both making and renewing extensions of credit.

As of December 31, 2015, Bluegreen had $31.2 million of indebtedness scheduled to become due during 2016.  Historically, much of Bluegreen’s debt has been renewed or refinanced in the ordinary course of business.  However, there is no assurance that Bluegreen will in the future be able to obtain sufficient external sources of liquidity on attractive terms, or at all, or otherwise renew, extend or refinance all or any portion of its outstanding debt.  Any of these occurrences may have a material adverse impact on Bluegreen’s liquidity and financial condition.

Bluegreen's indebtedness may impact its financial condition and results of operations, and the terms of Bluegreen's indebtedness may limit its activities.

Bluegreen's level of debt and debt service requirements have several important effects on Bluegreen's operations.  Significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen's vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets generally.  In addition, Bluegreen's leverage position increases its vulnerability to economic and competitive pressures and may limit funds available for acquisitions, working capital, capital expenditures, dividends, and other general corporate purposes.  Further, the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to Bluegreen's indebtedness require Bluegreen to meet certain financial tests and restrict Bluegreen's ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments.  If Bluegreen fails to comply with the terms of its debt instruments, such debt may become due and payable immediately, which would have a material adverse impact on Bluegreen's cash position and financial condition.  Significant resources may be required to monitor Bluegreen's compliance with its debt instruments (from a quantitative and qualitative perspective), and such monitoring efforts may not be effective in all cases.

To the extent inflationary trends, tightened credit markets or other factors affect interest rates, Bluegreen’s debt service costs may increase.  If interest rates increased one percentage point, the effect on interest expense related to Bluegreen’s variable-rate debt would be an annual increase of $2.8 million, based on December 31, 2015 balances. 

The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to obtain, renew or extend credit facilities, or otherwise raise funds.

Rating agencies from time to time review prior corporate and specific transaction ratings in light of tightened ratings criteria.  In December 2015, Standard & Poor’s Rating Services affirmed Bluegreen’s ‘B+’ credit rating.  Bluegreen’s corporate credit rating is also based, in part, on rating agencies’ speculation about Bluegreen’s potential future debt and dividend levels.  If rating agencies were to downgrade Bluegreen’s corporate credit ratings, Bluegreen’s ability to raise funds on favorable terms, or at all, and Bluegreen’s liquidity, financial condition and results of operations could be adversely impacted.  In addition, if rating agencies downgraded their original ratings on certain bond classes in Bluegreen’s securitizations, holders of such bonds may be required to sell bonds in the marketplace, and such sales could occur at a discount, which could impact the perceived value of the bonds and Bluegreen’s ability to sell future bonds on favorable terms or at all.  While Bluegreen is not currently aware of any reasonably likely downgrades to its corporate credit rating or the ratings of bond classes in its securitizations, such ratings changes can occur without advance notice.

Bluegreen’s future success depends on its ability to market its products and services successfully and efficiently and Bluegreen’s marketing expenses may increase.

Bluegreen competes for customers with hotel and resort properties and other vacation ownership resorts.  The identification of sales prospects and leads, and the marketing of Bluegreen’s products and services to them are essential to Bluegreen’s success.  Bluegreen incurs expenses associated with marketing programs in advance of the closing of sales.  If Bluegreen’s lead identification and marketing efforts do not yield enough leads or Bluegreen is unable to successfully convert sales leads to sales, Bluegreen may be unable to recover the expense of its marketing programs and systems and its business, operating results and financial condition would be adversely affected.  In addition, Bluegreen is currently focusing and has increased its marketing efforts on selling to new customers, which typically involves a relatively higher marketing cost compared to sales to existing owners and therefore has increased and is expected to continue to increase Bluegreen’s sales and marketing expenses.  If Bluegreen is not

successful in offsetting the cost increase with greater sales revenue, Bluegreen’s operating results and financial condition would be adversely impacted.  In addition, Bluegreen's marketing efforts are subject to the risk of changing consumer behavior.  Changes in consumer behavior may adversely impact the effectiveness of marketing efforts and strategies which Bluegreen has in place and Bluegreen may not be able to timely and effectively respond to such changes.

Bluegreen generates a significant portion of its new sales prospects and leads through its arrangements with various third parties, including Bass Pro and Choice Hotels.  If these arrangements do not generate a sufficient number of leads or if these arrangements are terminated or limited and not replaced by other sources of sales prospects and leads, Bluegreen may not be able to successfully market and sell its products and services to new customers at current sales levels, at anticipated levels or at levels required in order to offset the costs associated with its marketing efforts.  This would adversely impact Bluegreen’s operating results and financial condition.

Bluegreen may not be successful in maintaining or expanding its capital-light business relationships, or its capital-light activities, including fee based sales and marketing arrangements, just-in-time VOI arrangements, and Secondary Market Sales activities, and such activities may not be profitable, which may have an adverse impact on Bluegreen’s results of operations and financial condition.

In 2009, Bluegreen began offering fee-based marketing, sales, resort management and other services to third-party developers.  Since that time, Bluegreen has continued to expand its capital-light business strategy, which Bluegreen believes enables it to leverage its expertise in sales and marketing, resort management, mortgage servicing, construction management and title services.  Bluegreen currently intends for its capital-light business activities to become an increasing portion of its business over time as such activities generally produce positive cash flow and typically require less capital investment than Bluegreen’s traditional vacation ownership business.  Bluegreen has attempted to structure these activities to cover its costs and generate a profit.  Sales of third party developers' VOIs must generate sufficient cash to comply with the terms of the developers' financing obligations as well as to pay the fees or commissions due Bluegreen.  The third party developers may not be able to obtain or maintain financing necessary to meet the developer’s requirements, which could impact Bluegreen's ability to sell the developers' inventory.  While Bluegreen could attempt to utilize other arrangements, including just-in-time arrangements, where Bluegreen would utilize its receivable credit facilities in order to provide fee-based marketing and sales services, this would reduce the credit otherwise available to Bluegreen.  Bluegreen commenced its capital-light activities largely during the recession in response to poor economic conditions and Bluegreen’s fee-based and other capital-light business activities in the future may be adversely impacted by changes in economic conditions.  While Bluegreen performs fee-based sales and marketing services, Bluegreen sells VOIs in a resort developed by a third party as an interest in the Bluegreen Vacation Club.  This subjects Bluegreen to a number of risks typically associated with selling products developed by others under its own brand name, including litigation risks.  Additionally, demand for the third party resorts may be below Bluegreen’s expectations.

Bluegreen also sells VOI inventory through Secondary Market arrangements which require low levels of capital deployment.  In connection with Secondary Market Sales, Bluegreen acquires VOI inventory from its resorts’ POAs on a non-committed basis in close proximity to the timing of when Bluegreen intends to sell such VOIs.  VOIs purchased from POAs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults and are generally acquired by Bluegreen at a discount.  While Bluegreen intends to increase its Secondary Market Sales efforts in the future, Bluegreen may not be successful in doing so, and these efforts may not result in Bluegreen achieving anticipated results.  Further Bluegreen’s Secondary Market Sale activities may subject Bluegreen to negative publicity, which could adversely impact Bluegreen’s reputation and business. 

Bluegreen’s results of operations and financial condition may be materially and adversely impacted if Bluegreen does not continue to participate in exchange networks and other strategic alliances with third parties or if Bluegreen’s customers are not satisfied with the networks in which Bluegreen participates or Bluegreen’s strategic alliances.

Bluegreen believes that its participation in exchange networks and other strategic alliances and its Traveler Plus™ program make ownership of Bluegreen VOIs more attractive by providing owners with the ability to take advantage of vacation experiences in addition to stays at Bluegreen’s resorts.  A VOI owner’s participation in the RCI exchange network allows an owner to exchange their annual VOI for occupancy at over 4,500 participating resorts, based upon availability and the payment of a variable exchange fee.  During 2015, approximately 9% of Bluegreen owners utilized the RCI exchange network for an exchange of two or more nights.  Bluegreen also has a strategic arrangement with Choice Hotels pursuant to which, subject to payments and conditions, certain of Bluegreen’s resorts have been branded as part of Choice Hotels’ Ascend Resort Collection® and Ascend Hotel Collection®.  In

addition, Bluegreen’s Traveler Plus™ members have the ability to convert their Bluegreen Vacation Club points into Choice Privileges® points which can be used for stays at participating Choice Hotels or may convert their Bluegreen Vacation Club points to stay at Ascend Collection® hotels.  In addition, all Bluegreen Vacation Club members may convert their Bluegreen Vacation Club points for Choice Privileges® points for a fee.  Bluegreen Vacation Club members, for an additional annual fee, may also participate in the Bluegreen Traveler Plus™ program which allows them to use their points for a variety of hotel stays, RV site stays within the “Coast to Coast" network, or various cruise vacations.  Also, for a nominal fee, Bluegreen Vacation Club owners who purchased or upgraded their VOI since July 1, 2007 and participate in the Bluegreen Traveler Plus™ program have the ability to use their vacation points to reserve accommodations in 42 additional resort locations through Direct Exchange.  Bluegreen may not be able to or desire to continue to participate in the RCI or Direct Exchange networks in the future.  In addition, these networks and Bluegreen’s Traveler Plus™ program may not continue to operate effectively, and Bluegreen’s customers may not be satisfied with them.  Further, Bluegreen’s relationship with Choice Hotels may not be well received by Bluegreen’s customers or otherwise result in the benefits Bluegreen expects to derive from the relationship.  In addition, Bluegreen may not be successful in identifying or entering into new strategic relationships in the future.  If any of these events should occur, Bluegreen’s results of operations and financial condition may be materially and adversely impacted.

The resale market for VOIs could adversely affect Bluegreen’s business.

Based on Bluegreen’s experience at its resorts and at resorts owned by third parties, Bluegreen believes that resales of VOIs in the secondary market generally are made at net sales prices below the original customer purchase prices.  The relatively lower sales prices are partly attributable to the high marketing and sales costs associated with the initial sales of such VOIs.  Accordingly, the initial purchase of a VOI may be less attractive to prospective buyers and Bluegreen competes with buyers who seek to resell their VOIs.  While VOI resale clearing houses or brokers currently do not have a material impact on Bluegreen’s business, the availability of resale VOIs at lower prices, particularly if an organized and liquid secondary market develops, could adversely affect Bluegreen’s level of sales and sales prices, which in turn would adversely affect Bluegreen’s results of operations.

Bluegreen is subject to the risks of the real estate market and the risks associated with real estate development, including a decline in real estate values and a deterioration of other conditions relating to the real estatemarket and real estate development.

Real estate markets are cyclical in nature and highly sensitive to changes in national and regional economic conditions, including:

Deterioration in general economic conditions or in the real estate market would have a material adverse effect on Bluegreen’s business.

To the extent Bluegreen decides to acquire more real estate inventory in the future, the availability of land for development of resort properties at favorable prices at that time will be critical to Bluegreen’s profitability and the ability to cover its significant selling, general and administrative expenses, cost of capital and other expenses.  If Bluegreen is unable to acquire such land or resort properties at a favorable cost, Bluegreen’s results of operations may be materially, adversely impacted.  The profitability of Bluegreen’s real estate development activities is also impacted by the cost of construction materials and services.  Should the cost of construction materials and services rise, the ultimate cost of Bluegreen’s future resorts inventory when developed could increase and have a material, adverse impact on Bluegreen’s results of operations.

Adverse outcomes in legal or other regulatory proceedings, including claims for development-related defects, could adversely affect Bluegreen’s financial condition and operating results.

In the ordinary course of business, Bluegreen is subject to litigation and other, legal and regulatory proceedings, which result in significant expenses and devotion of time.  In addition, litigation is inherently uncertain and adverse outcomes in the litigation and other proceedings to which Bluegreen is subject could adversely affect its financial condition and operating results.

Bluegreen engages third-party contractors to construct its resorts.  Bluegreen also historically engaged third-party contractors to develop the communities within its former Bluegreen Communities business.  However, Bluegreen’s customers may assert claims against Bluegreen for construction defects or other perceived development defects, including, without limitation, structural integrity, the presence of mold as a result of leaks or other defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer defects and defects in the engineering of amenities.  In addition, certain state and local laws may impose liability on property developers with respect to development defects discovered in the future.  Bluegreen could have to accrue a significant portion of the cost to repair such defects in the quarter when such defects arise or when the repair costs are reasonably estimable.  In addition, liabilities related to Bluegreen Communities that were not assumed by Southstar Development Partners, Inc. (“Southstar”) in connection with its purchase of substantially all of the assets which comprised Bluegreen Communities on May 4, 2012, including those relating to Bluegreen Communities’ operations prior to the closing of the transaction, remain Bluegreen’s responsibility. 

See “Item 3 - Legal Proceedings” for a description of currently pending legal matters with respect to Bluegreen.  Costs associated with litigation, including claims for development-related defects, and the outcomes thereof could adversely affect Bluegreen’s liquidity, financial condition and operating results.

Bluegreen may be adversely affected by extensive federal, state and local laws and regulations and changes in applicable laws and regulations, including the cost of maintaining compliance with respect tonew or existing laws and regulations and the imposition of additional taxes on operations.  In addition, results of audits of Bluegreen’s tax returns or those of Bluegreen’s subsidiaries may have a material adverse impact on Bluegreen’s financial condition.



The federal government and the states and local jurisdictions in which Bluegreen operates have enacted extensive regulations that affect the manner in which Bluegreen markets and sells VOIs and conducts its other business operations.  In addition, many states have adopted specific laws and regulations regarding the sale of VOIs.  Many states, including Florida and South Carolina, where certain of Bluegreen’s resorts are located, extensively regulate

the creation and management of timeshare resorts, the marketing and sale of timeshare properties, the escrow of purchaser funds prior to the completion of construction and closing, the content and use of advertising materials and promotional offers, the delivery of an offering memorandum and the creation and operation of exchange programs and multi-site timeshare plan reservation systems. Moreover, with regard to sales conducted in South Carolina, the closing of real estate and mortgage loan transactions must be conducted under the supervision of an attorney licensed in South Carolina and otherwise in accordance with South Carolina’s Time Sharing Transaction Procedures Act.  Most states also have other laws that are applicable to Bluegreen’s activities, such as timeshare project registration laws, real estate licensure laws, mortgage licensure laws, sellers of travel licensure laws, anti-fraud laws, consumer protection laws, telemarketing laws, prize, gift and sweepstakes laws, and consumer credit laws.  Bluegreen's management of, and dealings with, POAs, including Bluegreen's purchase of defaulted inventory from POAs in connection with its Secondary Market Sales, is also subject to state laws and resort rules and regulations, including those with respect to the establishment of budgets and expenditures, rule-making, and the imposition of maintenance assessments.



Bluegreen currently is authorized to market and sell VOIs in all locations at which its marketing and sales are conducted.  If Bluegreen’s agents or employees violate applicable regulations or licensing requirements, their acts or omissions could cause the states where the violations occurred to revoke or refuse to renew Bluegreen’s licenses, render Bluegreen’s sales contracts void or voidable, or impose fines on Bluegreen based on past activities.



Further, the Consumer Finance Protection Bureau, created under the Dodd-Frank Act, has emphasized new regulatory focus on areas of Bluegreen’s business such as consumer mortgage servicing and debt collection, credit reporting and consumer financial disclosures, all of which affect the manner in which Bluegreen provides purchase money financing to the purchasers of its VOIs and conducts its lending and loan servicing operations.



In addition, the federal government and the states and local jurisdictions in which Bluegreen conducts business have generally enacted extensive regulations relating to direct marketing and telemarketing, including the federal

government’s national “Do Not Call” list, and the making of marketing and related calls to cell phone users, a significant development in light of cell phone usage rapidly becoming the primary method of communication.  The regulations have impacted Bluegreen’s marketing of VOIs, and Bluegreen has taken steps designed to ensure compliance with these new regulations.  However, these steps have increased and are expected to continue to increase Bluegreen’s marketing costs.costs and may not prevent failures in compliance.  Bluegreen cannot predict the impact that these legislative initiatives or any other legislative measures that may be proposed or enacted in the future may have on Bluegreen’s marketing strategies and results.  Further, from time to time, complaints are filed against Bluegreen by individuals claiming that they received calls in violation of applicable regulations.



Currently, most states have taxed VOIs as real estate, imposing property taxes that are billed to the respective POAs that maintain the related resorts and have not sought to impose sales tax upon the sale of the VOI or accommodations tax upon the use of the VOI.  From time to time, however, various states have attempted to promulgate new laws or apply existing laws impacting the taxation of VOIs to require that sales or accommodations taxes be collected.  Should new state or local laws be implemented or interpreted to impose sales or accommodations taxes on VOIs, Bluegreen’s business could be materially adversely affected.



From time to time, consumers file complaints against Bluegreen in the ordinary course of Bluegreen’s business.  Bluegreen could be required to incur significant costs to resolve these complaints or enter into consents with regulators regarding its activities.  Bluegreen may not remain in compliance with all applicable federal, state and local laws and regulations, and violations of applicable laws may have adverse implications on Bluegreen, including negative public relations, potential litigation and regulatory sanctions.  The expense, negative publicity and potential sanctions associated with any failure to comply with applicable laws or regulations could have a material adverse effect on Bluegreen’s results of operations or financial position.



In addition, VOIs may in the future be deemed to be securities under federal or state law and therefore subject to applicable securities regulation, which could have a material adverse effect on Bluegreen due to, among other things, the cost of compliance with such regulations.



The vacation ownership and hospitality industries are highly competitive, and Bluegreen may not be able to compete successfully.

Bluegreen competes with various high profile and well-established operators, many of which have greater liquidity and financial resources than Bluegreen.  Many of the world's most recognized lodging, hospitality and entertainment companies develop and sell time-share units or VOIs in resort properties.  Bluegreen also competes with numerous

smaller owners and operators of vacation ownership resorts and also faces competition from alternative lodging options available to consumers through both traditional methods of delivery as well as new web portals and applications, including private rentals of homes or apartments or condominium units, which have increased in popularity in recent years.  Bluegreen's ability to remain competitive and to attract and retain customers depends on its customers' satisfaction with its products and services as well as on distinguishing the quality, value, and efficiency of its products and services from those offered by its competitors.  Customer dissatisfaction with experiences at its resorts or otherwise as a member of the Bluegreen Vacation Club, including due to an inability to use points for desired stays, could result in negative publicity and/or a decrease in sales, or otherwise adversely impact Bluegreen's ability to successfully compete in the vacation ownership and hospitality industries.  Bluegreen may not be able to timely and sufficiently identify and remediate the cause of customer dissatisfaction.  Any of these events could materially and adversely impact Bluegreen's operating results and financial condition.

Bluegreen would suffer substantial losses and Bluegreen’s liquidity position could be adversely impacted if customers to whom Bluegreen provides financing default on their obligations.

Prior to December 15, 2008, Bluegreen did not perform credit checks on the purchasers of its VOIs in connection with Bluegreen’s financing of their purchases.  Effective December 15, 2008, Bluegreen implemented a FICO® score-based credit underwriting program.  Bluegreen enhanced this credit underwriting program starting in January 2010.  While Bluegreen’s loan portfolio originated after December 15, 2008 has to date experienced defaults at a lower rate than loans originated prior to that date, Bluegreen’s FICO® score-based underwriting standards may not continue to result in decreased default rates or otherwise result in the improved performance of Bluegreen’s notes receivable.  Adverse conditions in the mortgage industry, including credit availability, borrowers’ financial profiles, prepayment rates and other factors, including those outside Bluegreen’s control, may increase the default rates Bluegreen experiences or otherwise negatively impact the performance of its notes receivable.  In recent years, external parties have been discouraging certain borrowers from staying current on their note payments.  Although in many cases Bluegreen may have recourse against a buyer for the unpaid purchase price, certain states have laws that limit Bluegreen’s ability to recover personal judgments against customers who have defaulted on their loans or Bluegreen may determine that the cost of doing so may not be justified.  Historically, Bluegreen has generally not pursued such recourse against its customers.  In the case of Bluegreen’s notes receivable secured by VOIs, if Bluegreen is unable to collect the defaulted amount due, Bluegreen traditionally has terminated the customer’s interest in the Bluegreen Vacation Club and then remarketed the recovered VOI.  Irrespective of Bluegreen’s remedy in the event of a default, Bluegreen cannot recover the marketing, selling and administrative costs associated with the original sale and such costs generally exceed the cash received by Bluegreen from the buyer at the time of the sale.  In addition, Bluegreen will need to incur such costs again in order to resell the VOI.  Bluegreen updates its estimate of such future losses each quarter, and consequently, the charge against sales in a particular period may be impacted, favorably or unfavorably, by a change in expected losses related to notes originated in prior periods.  In addition, defaults may cause buyers of, or lenders whose loans are secured by, Bluegreen’s VOI notes receivable to reduce the amount of availability or advance rates under receivables purchase and credit facilities, or to result in an increase the interest costs associated with such facilities.  In such an event, the cost of financing may increase and Bluegreen may not be able to secure replacement or alternative financing on terms acceptable to Bluegreen, if at all, which would adversely affect Bluegreen’s earnings, financial position and liquidity.

Under the terms of Bluegreen’s pledged and receivable sale facilities, Bluegreen may be required, under certain circumstances, to replace receivables or to pay down the loan to within permitted loan-to-value ratios.  Additionally, the terms of Bluegreen’s securitization transactions require Bluegreen to repurchase or replace loans if Bluegreen breached any of the representations and warranties Bluegreen made at the time Bluegreen sold the receivables.  These agreements also often include terms providing that in the event of defaults or delinquencies by customers in excess of stated thresholds, or if other performance thresholds are not met, substantially all of Bluegreen’s cash flow from its retained interest in the receivable portfolios sold will be required to be paid to the parties who purchased the receivables from Bluegreen.

While Bluegreen has attempted to restructure its business to reduce its need for and reliance on financing for liquidity in the short term, there is no assurance that Bluegreen’s business and profitability will not be impacted by its ability to obtain financing, which may not be available on favorable terms, or at all. 

In connection with sales of VOIs, Bluegreen may offer financing to the purchaser of up to 90% of the purchase price of the VOI.  However, Bluegreen incurs selling, marketing and administrative cash expenditures prior to and concurrent with the sale.  These costs generally exceed the down payment Bluegreen receives at the time of the sale.  Accordingly, Bluegreen’s ability to borrow against or sell its notes receivable has historically been a critical factor in Bluegreen’s continued liquidity, and Bluegreen therefore has depended on funds from its credit facilities and

securitization transactions to finance its operations.  If Bluegreen’s pledged receivables facilities terminate or expire and Bluegreen is unable to extend them or replace them with comparable facilities, or if Bluegreen is unable to continue to participate in securitization-type transactions and “warehouse” facilities on acceptable terms, Bluegreen’s liquidity, cash flow and profitability would be materially and adversely affected.  Credit market disruptions have in the past adversely impacted the willingness of banks and other finance companies to provide “warehouse” lines of credit for VOI receivables and resulted from time to time in the term securitization market being unavailable.  Future credit market disruptions may have similar effects or otherwise make obtaining additional and replacement external sources of liquidity more difficult and more costly.

In addition, financing for real estate acquisition and development and the capital markets for corporate debt is cyclical.  While Bluegreen has increased its focus on expanding its fee-based service business and encouraging higher down payments in connection with sales.  There is no assurance that these initiatives will enhance Bluegreen’s financial position or otherwise be successful in the long term. 

Notwithstanding the initiatives implemented by Bluegreen to improve its cash position, Bluegreen anticipates that it will continue to seek and use external sources of liquidity, including funds that Bluegreen obtains pursuant to additional borrowings under its existing credit facilities, under credit facilities that Bluegreen may obtain in the future, under securitizations in which Bluegreen may participate in the future or pursuant to other borrowing arrangements, to:

Bluegreen’s ability to service or refinance its indebtedness or to obtain additional financing (including its ability to consummate future term securitizations) depends on the credit markets and on Bluegreen’s future performance, which is subject to a number of factors, including the success of Bluegreen’s business, Bluegreen’s results of operations, leverage, financial condition and business prospects, prevailing interest rates, general economic conditions, the performance of Bluegreen’s receivables portfolio, and perceptions about the vacation ownership and real estate industries.

As of December 31, 2016, Bluegreen had $7.5 million of indebtedness scheduled to become due during 2017.  Historically, much of Bluegreen’s debt has been renewed or refinanced in the ordinary course of business.  However, there is no assurance that Bluegreen will in the future be able to obtain sufficient external sources of liquidity on attractive terms, or at all, or otherwise renew, extend or refinance all or any portion of its outstanding debt.  Any of these occurrences may have a material adverse impact on Bluegreen’s liquidity and financial condition.

Bluegreen's indebtedness may impact its financial condition and results of operations, and the terms of Bluegreen's indebtedness may limit its activities.

Bluegreen's level of debt and debt service requirements have several important effects on Bluegreen's operations.  Significant debt service cash requirements reduce the funds available for operations and future business opportunities and increase Bluegreen's vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets generally.  In addition, Bluegreen's leverage position increases its vulnerability to economic and competitive pressures and may limit funds available for acquisitions, working capital, capital expenditures, dividends, and other general corporate purposes.  Further, the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to Bluegreen's indebtedness require Bluegreen to meet certain financial tests and restrict Bluegreen's ability to, among other things, pay dividends, borrow additional funds, dispose of assets or make investments.  If Bluegreen fails to comply with the terms of its debt instruments, such debt may become due and payable immediately, which would have a material adverse impact on Bluegreen's cash position and financial condition.  Significant resources may be required to monitor Bluegreen's compliance with its debt instruments (from a quantitative and qualitative perspective), and such monitoring efforts may not be effective in all cases.

To the extent inflationary trends, tightened credit markets or other factors affect interest rates, Bluegreen’s debt service costs may increase.  If interest rates increased one percentage point, the effect on interest expense related to Bluegreen’s variable-rate debt would be an annual increase of $2.8 million, based on December 31, 2016 balances. 

The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to obtain, renew or extend credit facilities, or otherwise raise funds.

Rating agencies from time to time review prior corporate and specific transaction ratings in light of tightened ratings criteria.  In December 2016, Standard & Poor’s Rating Services affirmed Bluegreen’s ‘B+’ credit rating.  Bluegreen’s corporate credit rating is also based, in part, on rating agencies’ speculation about Bluegreen’s potential future debt and dividend levels.  If rating agencies were to downgrade Bluegreen’s corporate credit ratings, Bluegreen’s ability to raise funds on favorable terms, or at all, and Bluegreen’s liquidity, financial condition and results of operations could be adversely impacted.  In addition, if rating agencies downgraded their original ratings on certain bond classes in Bluegreen’s securitizations, holders of such bonds may be required to sell bonds in the marketplace, and such sales could occur at a discount, which could impact the perceived value of the bonds and Bluegreen’s ability to sell future bonds on favorable terms or at all.  While Bluegreen is not currently aware of any reasonably likely downgrades to its corporate credit rating or the ratings of bond classes in its securitizations, such ratings changes can occur without advance notice.

Bluegreen’s future success depends on its ability to market its products and services successfully and efficiently and Bluegreen’s marketing expenses have increased and may continue to increase in the future.

Bluegreen competes for customers with hotel and resort properties, other vacation ownership resorts and alternative lodging options, including private rentals of homes and apartments or condominium units.  The identification of sales prospects and leads, and the marketing of Bluegreen’s products and services to them are essential to Bluegreen’s success.  Bluegreen incurs expenses associated with marketing programs in advance of the closing of sales.  If Bluegreen’s lead identification and marketing efforts do not yield enough leads or Bluegreen is unable to successfully convert sales leads to sales, Bluegreen may be unable to recover the expense of its marketing programs and systems and its business, operating results and financial condition would be adversely affected.  In addition, Bluegreen is currently focusing and has increased its marketing efforts on selling to new customers, which typically involves a relatively higher marketing cost compared to sales to existing owners and therefore has increased and is expected to continue to increase Bluegreen’s sales and marketing expenses.  If Bluegreen is not successful in offsetting the cost increase with greater sales revenue, Bluegreen’s operating results and financial condition would be adversely impacted.  In addition, Bluegreen's marketing efforts are subject to the risk of changing consumer behavior.  Changes in consumer behavior may adversely impact the effectiveness of marketing efforts and strategies which Bluegreen has in place and Bluegreen may not be able to timely and effectively respond to such changes.

Changes in new forms of competition, including but not limited to internet marketing models or online applications may impact Bluegreen’s ability for lead generation.

Bluegreen generates a significant portion of its new sales prospects and leads through its arrangements with various third parties, including Bass Pro and Choice Hotels.  If these arrangements do not generate a sufficient number of leads or if these arrangements are terminated or limited and not replaced by other sources of sales prospects and leads, Bluegreen may not be able to successfully market and sell its products and services to new customers at current sales levels, at anticipated levels or at levels required in order to offset the costs associated with its marketing efforts.  This would adversely impact Bluegreen’s operating results and financial condition.

Bluegreen may not be successful in maintaining or expanding its capital-light business relationships, or its capital-light activities, including fee based sales and marketing arrangements, just-in-time VOI arrangements, and Secondary Market Sales activities, and such activities may not be profitable, which may have an adverse impact on Bluegreen’s results of operations and financial condition.

Bluegreen offers fee-based marketing, sales, resort management and other services to third-party developers.  Bluegreen has over the last several years continued to expand its capital-light business strategy, which Bluegreen believes enables it to leverage its expertise in sales and marketing, resort management, mortgage servicing, construction management and title services.  Bluegreen currently intends to continue its focus on its capital-light business activities as such activities generally produce positive cash flow and typically require less capital investment than Bluegreen’s traditional vacation ownership business.  Bluegreen has attempted to structure these activities to cover its costs and generate a profit.  Sales of third party developers' VOIs must generate sufficient cash to comply with the terms of their financing obligations as well as to pay the fees or commissions due Bluegreen.  The third party developers may not be able to obtain or maintain financing necessary to meet the developer’s requirements, which could impact Bluegreen's ability to sell the developers' inventory.  While Bluegreen could attempt to utilize other arrangements, including just-in-time arrangements, where Bluegreen would utilize its receivable credit facilities in order to provide fee-based marketing and sales services, this would reduce the credit

otherwise available to Bluegreen and impact profitability.  Bluegreen commenced its capital-light activities largely during the recession in response to poor economic conditions and Bluegreen’s fee-based and other capital-light business activities in the future may be adversely impacted by changes in economic conditions.  While Bluegreen performs fee-based sales and marketing services, Bluegreen sells VOIs in a resort developed by a third party as an interest in the Bluegreen Vacation Club.  This subjects Bluegreen to a number of risks typically associated with selling products developed by others under its own brand name, including litigation risks.  Additionally, third party resorts may not meet Bluegreen’s expectations or match the needs of Bluegreen’s owners.

Bluegreen also sells VOI inventory through Secondary Market arrangements which require low levels of capital deployment.  In connection with Secondary Market Sales, Bluegreen acquires VOI inventory from its resorts’ POAs on a non-committed basis in close proximity to the timing of when Bluegreen intends to sell such VOIs.  VOIs purchased from POAs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults and are generally acquired by Bluegreen at a discount.  While Bluegreen intends to increase its Secondary Market Sales efforts in the future, Bluegreen may not be successful in doing so, and these efforts may not result in Bluegreen achieving anticipated results.  Further Bluegreen’s Secondary Market Sale activities may subject Bluegreen to negative publicity, which could adversely impact Bluegreen’s reputation and business. 

Bluegreen’s results of operations and financial condition may be materially and adversely impacted if Bluegreen does not continue to participate in exchange networks and other strategic alliances with third parties or if Bluegreen’s customers are not satisfied with the networks in which Bluegreen participates or Bluegreen’s strategic alliances.

Bluegreen believes that its participation in exchange networks and other strategic alliances and its Traveler Plus™ program make ownership of Bluegreen VOIs more attractive by providing owners with the ability to take advantage of vacation experiences in addition to stays at Bluegreen’s resorts.  A VOI owner’s participation in the RCI exchange network allows an owner to exchange their annual VOI for occupancy at over 4,300 participating resorts, based upon availability and the payment of a variable exchange fee.  During 2016, approximately 9% of Bluegreen owners utilized the RCI exchange network for an exchange of two or more nights.  Bluegreen also has a strategic arrangement with Choice Hotels pursuant to which, subject to payments and conditions, certain of Bluegreen’s resorts have been branded as part of Choice Hotels’ Ascend Resort Collection® and Ascend Hotel Collection®.  In addition, Bluegreen’s Traveler Plus™ members have the ability to convert their Bluegreen Vacation Club points into Choice Privileges® points which can be used for stays at participating Choice Hotels or may convert their Bluegreen Vacation Club points to stay at Ascend Collection® hotels.  Also, all Bluegreen Vacation Club members may convert their Bluegreen Vacation Club points for Choice Privileges® points for a fee.  Bluegreen Vacation Club members, for an additional annual fee, may also participate in the Bluegreen Traveler Plus™ program which allows them to use their points for a variety of hotel stays, RV site stays within the “Coast to Coast" network, or various cruise vacations.  Also, for a nominal fee, Bluegreen Vacation Club owners who purchased or upgraded their VOI since July 1, 2007 and participate in the Bluegreen Traveler Plus™ program have the ability to use their vacation points to reserve accommodations in 43 additional resort locations through Direct Exchange.  Bluegreen may not be able to or desire to continue to participate in the RCI or Direct Exchange networks in the future.  In addition, these networks and Bluegreen’s Traveler Plus™ program may not continue to operate effectively, and Bluegreen’s customers may not be satisfied with them.  Further, Bluegreen’s relationship with Choice Hotels may not be well received by Bluegreen’s customers or otherwise result in the benefits Bluegreen expects to derive from the relationship.  In addition, Bluegreen may not be successful in identifying or entering into new strategic relationships in the future.  If any of these events should occur, Bluegreen’s results of operations and financial condition may be materially and adversely impacted.

The resale market for VOIs could adversely affect Bluegreen’s business.

Based on Bluegreen’s experience at its resorts and at resorts owned by third parties, Bluegreen believes that resales of VOIs in the secondary market generally are made at net sales prices below the original customer purchase prices.  The relatively lower sales prices are partly attributable to the high marketing and sales costs associated with the initial sales of such VOIs.  Accordingly, the initial purchase price of a VOI may be less attractive to prospective buyers and Bluegreen competes with buyers who seek to resell their VOIs.  While VOI resale clearing houses or brokers currently do not have a material impact on Bluegreen’s business, the availability of resale VOIs at lower prices, particularly if an organized and liquid secondary market develops, could adversely affect Bluegreen’s level of sales and sales prices, which in turn would adversely affect Bluegreen’s results of operations.

Bluegreen is subject to the risks of the real estate market and the risks associated with real estate development, including a decline in real estate values and a deterioration of other conditions relating to the real estatemarket and real estate development.

Real estate markets are cyclical in nature and highly sensitive to changes in national and regional economic conditions, including:

A deterioration in general economic conditions or in the real estate market would have a material adverse effect on Bluegreen’s business.

To the extent Bluegreen decides to acquire more real estate inventory in the future, the availability of land for development of resort properties at favorable prices at that time will be critical to Bluegreen’s profitability and the ability to cover its significant selling, general and administrative expenses, cost of capital and other expenses.  If Bluegreen is unable to acquire such land or resort properties at a favorable cost, Bluegreen’s results of operations may be materially, adversely impacted.  The profitability of Bluegreen’s real estate development activities is also impacted by the cost of construction materials and services.  Should the cost of construction materials and services rise, the ultimate cost of Bluegreen’s future resorts inventory when developed could increase and have a material, adverse impact on Bluegreen’s results of operations.

Adverse outcomes in legal or other regulatory proceedings, including claims of non-compliance with applicable regulations or development-related defects, could adversely affect Bluegreen’s financial condition and operating results.

In the ordinary course of business, Bluegreen is subject to litigation and other legal and regulatory proceedings, which result in significant expenses and devotion of time.  In addition, litigation is inherently uncertain and adverse outcomes in the litigation and other proceedings to which Bluegreen is or may be subject could adversely affect its financial condition and operating results.

Bluegreen engages third-party contractors to construct its resorts.  Bluegreen also historically engaged third-party contractors to develop the communities within its former Bluegreen Communities business.  However, Bluegreen’s customers may assert claims against Bluegreen for construction defects or other perceived development defects, including, without limitation, structural integrity, the presence of mold as a result of leaks or other defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer defects and defects in the engineering of amenities.  In addition, certain state and local laws may impose liability on property developers with respect to development defects discovered in the future.  Bluegreen could have to accrue a significant portion of the cost to repair such defects in the quarter when such defects arise or when the repair costs are reasonably estimable.  In addition, liabilities related to Bluegreen Communities that were not assumed by Southstar Development Partners, Inc. (“Southstar”) in connection with Southstar’s purchase of substantially all of the assets which comprised Bluegreen Communities on May 4, 2012, including those relating to Bluegreen Communities’ operations prior to the closing of the transaction, remain Bluegreen’s responsibility. 

See “Item 3 - Legal Proceedings” for a description of currently pending legal matters with respect to Bluegreen.  Costs associated with litigation, including claims for development-related defects, and the outcomes thereof could adversely affect Bluegreen’s liquidity, financial condition and operating results.

Environmental liabilities, including claims with respect to mold or hazardous or toxic substances, could have a material adverse impact on Bluegreen’s financial condition and operating results.



Under various federal, state and local laws, ordinances and regulations, as well as common law, Bluegreen may be liable for the costs of removal or remediation of certain hazardous or toxic substances, including mold, located on, in or emanating from property that Bluegreen owns, leases or operates, as well as related costs of investigation and

property damage at such property.  These laws often impose liability without regard to whether Bluegreen knew of, or was responsible for, the presence of the hazardous or toxic substances.  The presence of such substances, or the failure to properly remediate such substances, may adversely affect Bluegreen’s ability to sell or lease its property or to borrow money using such property or receivables generated from the sale of such property as collateral.  Noncompliance with environmental, health or safety requirements may require Bluegreen to cease or alter operations at one or more of its properties.  Further, Bluegreen may be subject to common law claims by third parties based on damages and costs resulting from violations of environmental regulations or from contamination associated with one or more of Bluegreen’s properties.



A failure to maintain the integrity of internal or customer data could result in damage to Bluegreen's reputation and subject Bluegreen to costs, fines, or lawsuits.



Bluegreen's operations and activities require the collection and retention of large volumes of internal and customer data, including credit card numbers and other personally identifiable information of Bluegreen's customers and employees.  The integrity and protection of that customer, employee and company data is critical to Bluegreen.  If that data is inaccurate or incomplete, Bluegreen could make faulty decisions.  Bluegreen's customers and employees also have a high expectation that Bluegreen will adequately protect their personal information.  The information, security and privacy requirements imposed by governmental regulation are increasingly demanding.  Bluegreen's systems may not be able to satisfy these changing requirements and employee and customer expectations, or may require significant additional investments or time in order to do so.  Efforts to hack or breach security measures, failures of systems or software to operate as designed or intended, viruses, operator error, or inadvertent releases of data all threaten Bluegreen's information systems and records.  Bluegreen's reliance on computer, Internet-based and mobile systems and communications and the frequency and sophistication of efforts by hackers to gain unauthorized access to such systems have increased significantly in recent years.  A significant theft, loss, or fraudulent use of customer, employee, or company data could adversely impact Bluegreen's reputation and could result in remedial

and other expenses, fines, or litigation and could have a material adverse impact on Bluegreen’s results of operations and financial condition.



Bluegreen’s technology requires updating, the cost involved in updating the technology may be significant, and the failure to keep pace with developments in technology could impair Bluegreen's operations or competitive position.



The vacation ownership and hospitality industries require the utilization of technology and systems, including technology utilized for sales and marketing, mortgage servicing, property management, brand assurance and compliance, and reservation systems.  This technology requires continuous updating and refinements, including technology required to remain competitive and to comply with the legal requirements such as privacy regulations and requirements established by third parties.  Bluegreen intendsis currently taking steps to update its information technology platform, which has required, and is likely to continue to require, significant capital expenditures.  Older systems which have not yet been updated may increase the risk of operational inefficiencies, financial loss and non-compliance with applicable legal and regulatory requirements and Bluegreen may not be successful in updating such systems in the time frame or at the cost anticipated.  Further, as a result of the rapidly changing technological environment, systems which Bluegreen has put in place or expects to put in place in the near term may become outdated requiring new technology, and Bluegreen may not be able to replace those systems as quickly as its competition or within budgeted costs and time frames.  Further, Bluegreen may not achieve the benefits that may have been anticipated from any new technology or system.