Intrawest ULC, owner of the Whistler-Blackcomb resort that will be a 2010 Winter Olympics venue, clinched a deal to refinance $1.7-billion (U.S.) of debt yesterday afternoon, just hours before the two-year loan was set to expire.
The refinancing puts to rests concerns hanging over the Whistler-Blackcomb ski resort, which hosts alpine skiing and sliding events in 2010, but leaves broader questions about the health of the U.S. publicly traded asset manager that bought Intrawest two years ago.
The company had tried to refinance the debt for several months and scrambled this week as the deadline loomed, with at least one bondholder refusing to sign on to an extension.
Unanimous support was needed and Intrawest would have had to seek court protection from creditors had it not reached a deal.
New York-based Fortress Investment Group LLC paid $1.8-billion for Intrawest two years ago, financing the takeover mostly with debt.
It struggled to refinance it because of the chaos of the tight credit markets and plunging stock markets and also because Intrawest's business has weakened, as high-end tourism slumps and real estate suffers.
The credit market was a challenging factor, said Bill Jensen, chief executive officer of Intrawest.
"The support Fortress and our lenders have shown underscores their confidence in Intrawest and will enable us to continue to execute on our long-term strategic plans," Mr. Jensen said in a statement.
Intrawest and Fortress provided only a brief two-paragraph statement yesterday and did not include any terms of the new debt. The old debt had an interest rate of about 6.4 per cent.
Fortress's other major connection to the Vancouver Olympics was not settled yesterday.
The company's credit arm is lending $750-million (Canadian) to Millennium Development Corp. to build the $1-billion athlete's village just south of downtown Vancouver. A city official said this week that Fortress has assured the city that nothing is awry.
Several financial analysts questioned the financial strength of Fortress, whose stock has fallen more than 80 per cent in the past year. Analyst Jackson Turner of Argus Research rates Fortress stock "sell" - making the call because he doesn't see growth at the company, not because of impending severe stress.
"My 'sell' isn't indicating that I think Fortress is going to disappear," Mr. Turner said. "I don't think we're anywhere near that juncture at this point."
Fortress in September cancelled its quarterly dividend, which according to Citigroup Global Markets will conserve $100-million (U.S.) of cash every three months, staving off a potential cash crunch in early 2009.
Taxpayers would be on the hook if financing for the Olympic village fell through, said James Brander, professor at the University of British Columbia's Sauder School of Business.
"The Olympics will be a good investment, even if the province has to provide some backup funding," Mr. Brander said.
