Financially troubled Intrawest ULC insists the Games will go on at its flagship Whistler Blackcomb resort, but if it is forced to go through with a mid-Olympic auction, the ski resort giant could go downhill.
Intrawest spokesman Ian Galbraith stressed Thursday that reports its Olympic venue at Whistler, along with its other resorts, had been seized by its lenders are untrue.
He reiterated the Vancouver-based company’s message that it’s “business as usual” at the resort, which is going ahead with Olympic planning.
Private equity firm Fortress Investment Group LLC took on massive debt to acquire Intrawest for about $3.1 billion, made up of $1.38 billion of cash and $1.5 billion of debt in 2006.
But as the economic downturn set in, the value of ski resorts tumbled as cash strapped skiers vacationed less and less.
The new economic reality turned what seemed a lucrative acquisition into a liability for Fortress, which bought the properties during a real estate bubble, when money was cheap to borrow, said Kai Li, a business professor at the University of British Columbia who specializes in bankruptcy.
But with financing harder to obtain, the hedge fund can no longer afford to pay back its lenders, a group led by Lehman Brothers and Davidson Kempner Capital.
The group has been working with Fortress to restructure its debt and twice extended debt repayments.
But the group delivered a notice to Intrawest on Jan. 8 to begin the foreclosure process after Fortress defaulted on debt declared due on Dec. 24, 2009.
“This is right after the financial crisis, so all the lenders are pretty cautious about their lending so they maybe want to cut their losses and contain damages,” Li said.
Galbraith said while the economy hurt the business, along with the tourism sector in general, Intrawest has been generating strong cash flow from its resorts.
“That loan has been on the books for a while, it’s not something that’s happened because of the recession. It’s strictly a refinancing issue.”
Sources at the lenders said the timing of the auction, which falls in the midst of the Olympics, is due to a lack of progress in negotiations, and had nothing to do with the Games.
One source added that its highly likely the equity will not go up for auction and other channels of negotiation are more plausible.
Galbraith added the private company is still in talks with its lenders and its intent is to reach a settlement.