Fortress Investment Group LLC has saved its ownership of Intrawest ULC for a hefty price and now faces another severe challenge: Resurrecting the luxury real estate business that once produced most of the profits at the embattled resort company.
Just as the last Olympics ski racers banged through gates on Whistler Mountain - Intrawest's most valuable holding - New York-based Fortress came to a détente with its angry creditors. After missed debt payments, a fire sale of assets such as Copper Mountain in Colorado and a threatened and twice-postponed auction of assets by creditors, Fortress coughed up what was expected: $150-million (U.S.) of new equity to pay down debt.
The payment was reported on Saturday by the Wall Street Journal, citing unnamed sources. Intrawest and Fortress would not confirm the story yesterday. In a secretive battle between New York hedge funds, it was Fortress versus the likes of Oak Hill Advisors LP, a junk bond specialist, and the remnants of Lehman Brothers Holdings Inc.
The Journal said the deal with lenders is an agreement in principle and a final deal might not be in place until next month. The desperate refinancing is the result of Fortress buying Intrawest in a heavily leveraged buyout for $2.8-billion in 2006 at the apex of the real estate bubble.
"Fortress Investment Group continues to own and control Intrawest and all of its properties," Intrawest spokesman Ian Galbraith said in a statement yesterday. "Discussions with Intrawest's lenders are ongoing regarding refinancing and the company continues to operate 'business as usual' at all of its resort properties."
For Fortress, it's a restart from zero. Intrawest has valuable assets, such as Whistler Blackcomb, the co-host of the Olympics, but some holdings, such as Stratton Mountain in Vermont, have suffered from a lack of investment, according to industry analyst Hayley Wolff at Rochdale Securities LLC in Stamford, Conn.
"I guess they're not buying any new lifts," Ms. Wolff said.
Fortress, however, can reasonably expect to benefit from an improving real estate market, she said.
One thing that won't produce a gold-medal boost for Intrawest's finances is a post-Olympics glow for Whistler Blackcomb, she added.
This echoes the sentiment of Bill Jensen, Intrawest chief executive officer, who last year said a long-term bump from the Games seemed unlikely: "I don't know if it will be ever measured in dollars."
Ms. Wolff said it is back to basics for Whistler Blackcomb: Selling real estate, a business "that has essentially dried up." When Fortress bought Intrawest - a Vancouver company that began life as a real estate developer, not a ski area operator - two-thirds of the profit was in real estate.
David Ebner