SUNTERRA CORP. North Las Vegas, Nevada; Back From The Brink, But No Time To Relax.(THE NEW AMERICA)

Byline: DAVID ISAAC

Talk about needing a vacation from the grind. That's where Sunterra found itself a few years ago.

The company, which develops and operates vacation ownership resorts, or time shares, piled up huge losses in fiscal 2000, then followed that performance with more red ink in 2001 and 2002.

At one point Sunterra's stock price fell to a nickel a share from an all-time high of 32.17 in October 1997.

The main problem: Sunterra expanded quickly in the 1990s, from a company with about $70 million in revenue in fiscal 1996 to $500 million five years later. In the quest for growth, financial caution was sacrificed and the company gave loans to people who weren't qualified.

"They did not have tight credit controls, and they didn't provide enough allowance for that," said company spokesman Bryan Coy. "They were having default rates in the high-teens and 20s, and a provision of about 3%. Over time, mathematically that's going to kill you."

Fortunately for Sunterra, management got its arms around the problem. The company returned to profitability in fiscal 2003, then grew earnings to 90 cents a share last fiscal year, which ended in September.