Intrawest ULC, the heavily indebted owner of 2010 Winter Olympics co-host Whistler Mountain, is considering selling assets as it negotiates with lenders to refinance and pay down a $1.7-billion (U.S.) loan.
Options include breaking up the resort operator's business, with Quebec's Mont Tremblant being established as a separate, self-financed company. "It is a difficult global environment and Intrawest is considering all of the strategic options available to us to ensure our long-term business success," said company spokesman Ian Galbraith, who declined to discuss which assets are on the block or any details of the options.
"We continue to have constructive discussions with debt holders regarding the ongoing refinancing of our term loan."
The talks with lenders are taking place against a tough backdrop: Intrawest's real estate business is moribund and its destination ski resorts have been hit by the recession.
The Vancouver company was bought in 2006 for $2.8-billion, cash and debt, by private equity and hedge fund firm Fortress Investment Group LLC, which did the leveraged buyout with a $1.7-billion loan. When that loan came due last October, in the middle of the financial meltdown, Intrawest was forced to the brink of creditor protection before Fortress managed to refinance at the last moment.
"Getting any piece of financing done in this market is challenging," Fortress chief executive officer Wesley Edens told investors in March.
New York-based Fortress, which has seen its own stock drop about 80 per cent in the past year, said in the March conference call with investors that it is in talks with lenders to pay down the Intrawest loan in an effort to refinance the emergency one-year extension granted last year.
This week, Intrawest CEO Bill Jensen told the Colorado-based Summit Daily News that debt reduction is his company's priority. "We have to take every step to survive," said Mr. Jensen, who declined requests for an interview.
He told the Colorado paper that "some assets" are key for Intrawest and also said that Mont Tremblant, north of Montreal, could become a standalone company. Mr. Jensen added that many Intrawest assets, particularly in real estate, are hard to sell for a good price in the current depressed market.
In 2006, Intrawest made two-thirds of its profit from real estate, and Fortress bought the company at the peak of the real estate market. Intrawest owns 10 winter resorts and one golf resort, all of which sell real estate, and it also has real estate-only plays in places such as Hawaii and California.
But sales of resort real estate have collapsed in the recession, and Intrawest's key ski mountain properties have been battered because its best ones, led by Whistler, are destination resorts. More than half of Whistler's guests in 2007-08 came from outside Canada.
The Steamboat Springs ski resort in Colorado is another key destination site; Intrawest bought it in late 2006 for $261-million, backed by the then-deep pockets of Fortress.
"Does it surprise me that they're struggling right now? No, not at all," said analyst Hayley Wolff at Rochdale Securities LLC in Stamford, Conn. "By far their biggest property is Whistler and it's a pure destination resort."
And unlike competitor Vail Resorts Inc., Intrawest relies far more on real estate than its skiing operations for profits, Ms. Wolff said. Fortress was largely attracted to Intrawest for its real estate business, to complement Fortress's many investments in that sector. Operating ski areas wasn't among Fortress's skills, which is why, in mid-2008, it hired Mr. Jensen, previously a senior executive at Vail Resorts.
Mr. Galbraith, the Intrawest spokesman, said the company's cash flow is "strong" and has sufficient working capital to finance its daily operations and its interest payments. The company has laid off staff since the economic crash, mostly on the corporate level.
Fortress did not respond to calls for comment.
Intrawest was started in the 1970s as an urban real estate developer, led by Joe Houssian. In 1986, it bought Blackcomb Mountain and by 1996, when it bought Whistler Mountain, Intrawest had morphed in to a resort real estate firm and ski-area operator. Its performance ebbed and flowed with the economy and when Mr. Houssian sold in 2006, the company was under pressure to perform better. In retrospect, he sold at the perfect moment.
The Whistler resort has had a tough winter, even without the recession. In December a gondola tower snapped, injuring a dozen people and stranding more than 50 for several hours, generating a flurry of bad publicity.
At the time, the mountain was mostly bare of snow and significant accumulations didn't come until mid-February.
As for next winter, Whistler is battling the perception the mountain will be cut off from average skiers because of the Olympics. Whistler hosts the downhill ski races and sliding sports such as bobsled, and ski jumps are nearby. While the resort says 90 per cent of the terrain will be open, the two-hour journey to the mountain from Vancouver will be difficult in February and accommodations during the Games will be expensive and hard to get.
David Ebner