As Olympic skiers head for the starting gate of the men's Super-G race on Feb. 19 in Whistler, bankers in New York will be auctioning off the famous ski resort unless owner Intrawest Holdings can find a way to settle its debts.
The planned sale of Intrawest's flagship properties comes after the company failed to make a payment on a loan backed by some of its most famous resorts, including Steamboat Springs in Colorado, Mont Tremblant in Quebec and a majority stake in Whistler Blackcomb.
Intrawest was saddled with $1.5-billion (U.S.) of new debt after a $2.8-billion buyout by New York-based Fortress Investment Group LLC in 2006, just before the economic slowdown hit and sales of lift passes and resort condominiums slumped.
The group of lenders, which includes what's left of Lehman Brothers Holdings Inc., gave Intrawest and Fortress two extensions to find cash to pay down the loan. However, when the parties couldn't agree on a restructuring plan, the banks lost patience and on Jan. 8 gave Intrawest notice that the foreclosure process was beginning, a tactic viewed as a way to increase the pressure on Intrawest and Fortress to find a solution.
If that doesn't happen, the banks plan to auction the company off on Feb. 19. That's midway through the Vancouver Winter Games, which open on Feb. 12 and wrap up with closing ceremonies on Feb. 28.
The date of the planned sale is coincidence and had nothing to do with the Olympics, said a source familiar with the talks. Should the auction go ahead, the high profile of the Games ensures good advertising for the sellers, said Lindsay Meredith, a marketing strategy and economics professor at Simon Fraser University in Vancouver. He expects the resorts would be sold off in pieces, with Whistler Blackcomb bringing the highest bid.
"It's the jewel asset … I can't think of a better venue than the Olympics to do that," Mr. Meredith said in an interview Wednesday. "The banks aren't stupid here."
Intrawest chief executive officer Bill Jensen said the company is in talks with its lenders about refinancing, and in the meantime, "it's business as usual."
If the company is sold, potential buyers of its properties include hedge funds that already own a piece of the debt and funds that specialize in real estate.
A change of ownership isn't expected to affect the Games. In fact, behind the scenes, some close to the Olympic committee say it could actually be a boon.
Relations between the organizing committee and Fortress have at times been fractious as Fortress fought financial turmoil brought on by the economic slowdown and a decline in asset values. One source characterized Fortress as indifferent to the Olympics, given all the firm's other issues. By contrast, because the banks are trying to maximize the price in a sale, they are likely to see the value in having a successful Olympics that showcases the resort.
VANOC executives scoffed at suggestions the Games could be jeopardized by the latest Intrawest developments.
"There's always a chance, but only a very minuscule chance … smaller than small," said VANOC executive vice-president Dan Doyle, after the organizing committee's final pre-Olympic board meeting. "We have good, solid legal advice, and they are as confident as I am that things will proceed as planned."
Intrawest has been raising cash to pay down debt. The company last year sold its Copper Mountain resort in Colorado to American mountain resort company Powdr Corp., as well as two resorts in France to holiday company Pierre et Vacances. Prices were not disclosed for those transactions.
Last summer, Mr. Jensen told a ski industry conference in Whistler that the North American ski industry was hammered by the global recession and likely wouldn't recover for another couple of seasons. Poor snow conditions last season contributed to a further drop in resort revenues.
The Canadian Ski Council said the number of skiers and snowboarders to hit Canadian slopes fell 10 per cent last season, to 18.4 million visitors, from a record 20.5 million visitors in the 2007/08 season.
While the Olympics have brought better infrastructure to places such as Whistler, Mr. Jensen conceded last summer that the event wouldn't likely inject much cash into the operations.
With files from Rod Mickleburgh