Paul Morrison/Courtesy of Whistler Blackcomb

Workers and staff await the arrival of one of the Peak 2 Peak Gondola sky cabins last month. The $52 million project is the most recent upgrade undertaken by Intrawest, Whistler Blackcomb’s parent firm.

Officials at Intrawest, the parent company of Whistler Blackcomb (WB), announced late Thursday (Oct. 23) that the company had completed an agreement to refinance a $1.7 billion loan that was due on Thursday, thanks to unanimous support from its existing lender group.

“We are very pleased to have reached an agreement with our lenders, particularly given the challenges of the global credit markets,” said Bill Jensen, chief executive officer at Intrawest said in a statement issued on Thursday just after 4 p.m. “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. Intrawest has great assets, a sound business model and a solid track record. We are preparing for another successful winter season and look forward to providing our resort guests and homeowners with the exceptional level of service they have come to expect from our resort properties.”

The company’s financing situation created a stir late last week, when the Financial Times reported that Fortress Investment Group, the New York-based hedge fund firm that took over Intrawest in 2006, was working to shore up its investment in the Vancouver-based resort operator by refinancing a $1.68 billion Intrawest loan that was coming due. If that had not happened, there was a “low probability” that Intrawest might seek Chapter 11 bankruptcy protection, the Times reported.

Before Thursday’s announcement of a resolution, locals with finance backgrounds and other analysts said there was no reason to be worried about the coming ski season or WB’s continued operation.
Of the potential impacts to Whistler from the global economic crisis, Fortress Investment Group’s difficulty securing financing should be low on the list of concerns, said municipal Councillor Eckhard Zeidler, who has a background in investment banking.

Fortress has been trying for months to refinance a $1.68 billion U.S. loan it took out to purchase Intrawest, which owns 11 resorts in North America including WB.

“I’m not in any way, shape or form concerned about what that means for Whistler Blackcomb or for the community,” he said of Fortress’s potential options, such as seeking other lenders or even putting Intrawest up for sale.

Zeidler said discussing potential outcomes of Fortress’s difficulties in securing refinancing was speculation, but even if WB were to end up under the control of a receiver, the ski resort would continue operating. It wouldn’t make sense for anyone to sell off the various gondolas, chairlifts and restaurants as separate assets — WB’s value is in the ski hill operation as a revenue generator, he said.

“It’s in everyone’s interest that Intrawest and Whistler Blackcomb continue to operate with all the resources they need to produce a positive return,” Zeidler said. “I don’t think we’ll see it land on the ground here.”

Ian Galbraith, Intrawest’s director of media relations, said Monday (Oct. 20) that it was “business as usual” at Intrawest. Fortress’s efforts to refinance are separate from Intrawest, where preparations for the upcoming ski season were continuing, he said.

Fortress’s efforts to refinance have been ongoing since it acquired Intrawest in 2006, Galbraith said, and the loan was “under a normal course of action.”

“From Intrawest’s perspective it’s business as usual,” he said.

Still, a CTV report on Monday (Oct. 20) quoted an internal Intrawest memo to staff indicating that cost-cutting actions such as a hiring freeze are being considered because of tough economic times.

Ted Milner, who is running in next month’s municipal election and has a background in finance, said the Times article’s detail that Fortress is contributing $100 million of additional equity to support the loan is encouraging. He said he “suspects” Fortress will be able to refinance with the existing lenders.

Milner agreed that there will likely be no local impact. “Intrawest isn’t going anywhere,” he said.

Peter Mitham, a columnist for Business in Vancouver and co-author of Real Estate Investing for Canadians for Dummies, said Fortress’s refinancing woes wouldn’t be a great concern if the loan wasn’t coming due in the midst of global market volatility. He said many companies are struggling to secure financing.

Intrawest is a strong asset for Fortress and its ability to secure financing is a vote of confidence for the Whistler and B.C. economies, Mitham said. He also expectsed WB to continue operating, even without a new financing deal.

“With decreased tourist visits and overall economic constraints there’s going to be lots of causes for concern (in Whistler),” Mitham said. “I don’t think that (Fortress) should be top of the list.”

Mayor Ken Melamed said even if other Intrawest resorts had been impacted, Whistler is so successful that local effects were unlikely. WB is Intrawest’s “flagship” and it will continue to operate, he said.

“We’re confident that we’re going to carry on and we’re looking forward to a great ski season,” he said.

Fortress bought Intrawest in August 2006 for $2.8 billion, including debt. Fortress stock has dropped in the past year on the New York Stock Exchange from a high of $23.04 in October 2007 to a low of $3.25 on Oct. 10, 2008. It closed at $4.71 on Tuesday (Oct. 21).

Comments

Be the first to comment!