Many of us watched with curious, morbid fascination last month as Fortress Investment Group sought to refinance the $1.8 billion debt it took on to purchase Intrawest in 2006. At the last minute lenders agreed to a deal, although it’s assumed that the new financing became more expensive.
What would have happened had lenders not agreed to new terms is the subject of much speculation. The belief locally is that Whistler-Blackcomb, the jewel in the Intrawest crown but only a tiny piece of the Fortress empire, is a proven asset and regardless of the parent companies’ troubles the mountains would be kept open and operating until new ownership was found or the situation stabilized.
And we may yet see that hypothesis tested. Share prices of Fortress are now in the $3 range, and have been lower. They were once at $19.
More pertinent is the fact that investors have requested $4.5 billion in redemptions, about one quarter of the value of Fortress’s hedge funds. In order to return those investors’ money, Fortress will likely have to sell some assets.
Fortress, which bills itself as “an alternative investment firm” because it manages hedge funds and private equity funds and is publicly traded, has been closely observed on Wall Street as the financial crisis has deepened. The only thing more hypnotizing than watching one wounded giant stagger around is to see it collide with another, which is what happened last week when the 2010 Olympics were linked with Fortress.
The New York Times , covering the story from Ottawa, last week reported on the City of Vancouver’s $100 million loan guarantee to cover cost overruns of the city’s Olympic athletes’ village, which Fortress is financing. The leaked news of the loan guarantee, the cost overruns, a collapsing real estate market, the last minute refinancing of the Intrawest loans, the Olympics and civic elections all make for a juicy news story. The facts themselves are juicy enough but the Times used Argus Research analyst Jackson Turner and the Olympics to show how the whole mess could spread to Whistler.
“…the problems for Whistler, a premium resort that relies heavily on American and European customers, and the other Intrawest ski properties might be only beginning,” the Times reported.
“There’s little chance that things have gotten better at Intrawest since the Oct. 23 loan extension,” Turner said. “We have been seeing several signs of deterioration in the key resort business since then.”
This sort of fear/damnation through corporate association was continued Saturday night as a panel on Shaw Cable analyzed civic election results. Charlie Smith of the Georgia Straight managed to link Fortress and the Peak 2 Peak gondola with a caution that now would not be a good time for the Resort Municipality of Whistler to get into financial trouble.