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Who will start the bidding?



Amid last week's media frenzy about Intrawest and parent company Fortress Investment Group's debt obligations the word "Olympic" was thrown around regularly. The general context was: would the Olympic events - alpine skiing and bobsleigh, luge and skeleton - go ahead on Whistler and Blackcomb, Intrawest's flagship ski resort?

There was little mention of what Intrawest's financial troubles could mean for Mont Tremblant, Steamboat, Sandestin, Lake Las Vegas or any of the other resorts the company owns or operates. No one questioned whether Panorama would continue operating through the winter or suggested that Stratton had been seized by creditors. The Olympic connection to Whistler Blackcomb was the angle that most reporters and headline writers took, at least initially.

When the story broke last Wednesday the Olympics were only three weeks away, so the Olympic connection might have been made anyway. But the New York Post's anonymous source who suggested Fortress co-founder Wesley Edens felt he had a legal right to block the Olympics on Whistler Blackcomb certainly added fuel to the fire. The creditors' decision to schedule the Intrawest auction right in the middle of the Games also helped fan the flames. Which leads to the now obvious question: who benefits from this Olympic connection in what amounts to a Wall Street game of brinkmanship?

The answer is nobody, yet. But emphasizing the Olympic connection may have been an attempt to draw public money into the equation - it's been known to happen on Wall Street - or to underline the value of Intrawest prior to auction.

Assuming there is an auction - a lot can happen between now and Feb. 19, so that is a big assumption - what is being offered for sale? It's not Whistler Blackcomb, or any other resort owned by Intrawest. The lenders' equity interest in Intrawest is what's up for auction. A buyer of that equity interest could control Intrawest, but it might not be as clean and straight forward as it sounds.

The lenders include some of the biggest names to fall in the 2008 financial crisis: Bear Stearns (now owned by JP Morgan) and Lehman Brothers. They are anxious to get their money. The lenders agreed to restructure Fortress's $1.5 billion debt in October 2008 and extended it to October 2009. A further 60-day extension was given while Intrawest attempted to refinance one of its resorts. That attempt failed. Discussions between the lenders and Fortress/Intrawest did not lead to any new restructuring agreement, so the lenders have decided they've had enough.

Assuming, again, that there is an auction on Feb. 19, who would be interested in buying Intrawest? The last two years have left a lot of distressed assets around the world. An institution managing billions of dollars and looking for investments might consider Dubai, real estate developments in India or China where the middle class is growing, a high tech company or perhaps even a car company. There are a lot of things that look more promising than the ski and recreational real estate businesses that have been built around aging North American baby boomers.

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