Whistler Blackcomb Holdings will be saving roughly $8 million per year in interest costs after negotiating a major refinancing deal on its $261 million long-term debt.
Now, the company will pay roughly $9.6 million in interest annually as opposed to almost $17.5 million annually paid under the old financing regime.
The deal involves a $300 million, five-year revolving credit facility for the $261 million long-term debt, leaving the company with $39 million available under the new credit facility. The deal also comes with an option to borrow up to $75 million more.
"The refinancing positions our organization strongly for the future and reflects the confidence of the lending community in our business," said CEO and president Dave Brownlie, in a release.
"We expect a significant reduction in our annual interest expense as a result of the refinancing and the new fully revolving feature will allow us to manage working capital more effectively and provide us with significantly increased flexibility to pursue growth initiatives."
Prior to the refinancing, Whistler Blackcomb Holdings, which owns a 75 per cent interest in Whistler Mountain Resort Limited Partnership and Blackcomb Skiing Entreprises Limited Partnership, had two pieces of debt in place — senior debt at $135 million and second lien debt at $126 million.
That second lien debt had an 8.75 per cent interest rate with another three years left on its term — a deal negotiated at the Initial Public Offering between Intrawest and Fortress.
"In the current interest rate environment, that is a very high rate of interest and those notes were put in place at the time of the IPO so they've been around for three years, the environment was quite different back then and the company was in a different position," explained Jeremy Black, senior vice president and chief financial officer at Whistler Blackcomb. "It was the best that could be done at the time by Intrawest and Fortress when they did the IPO."
The company's interest rate is now down from 6.7 per cent (the blended average interest rate on the two debts) to 3.7 per cent for the first six months. That new rate is a floating rate that is expected to go down even further.
Black said they felt the refinancing was best for the organization.
"It helps us achieve our objective of increasing our flexibility and dramatically reducing our costs," he added.
As for those growth initiatives that can now potentially be pursued, Black said:
"We see a number of potential projects in the resort here similar to what we've done this year to the new chairlifts.
"That's the first step in what we believe are further opportunities to invest in the ski resort asset and in the non-ski asset."