Sea Island Co., a genteel resort for wealthy vacationers that has fallen on hard times, is selling its assets to two investment funds in a deal that is causing creditors to walk away from $340m in debt.

As part of a pact expected to be announced on Wednesday, funds managed by Oaktree Capital Management of Los Angeles and Avenue Capital Group in New York have agreed to pay $197.5m in cash for Sea Island. Under the deal, Sea Island also is expected to seek bankruptcy protection on Wednesday.