The Canada Post -- Business

Strictly downhill

As the 2010 Winter Olympics unfolded noisily in Vancouver and Whistler Blackcomb,

another drama was also unfolding quietly behind the scenes ...

As the 2010 Winter Olympics opened at Whistler Blackcomb mountain last month, it was no secret that its owners, Intrawest ULC, was about to be sold at auction.

Less well known was the fact that Colorado-based Vail Resorts, which had long had a standing offer for Whistler, was just one of several firms planning to bid at an auction initially set for February 18.

Then, during the first week of the 2010 Winter Olympics, came two further bombshells: Vail Resorts -- which was founded by the heirs to the Rockefeller family fortune in the 1950s — was rejected as a buyer by Intrawest's owner, New York-based Fortress Investment Group LLC. And the foreclosure auction in New York was put off until Feb 26 when the company won a brief extension from creditors.

A source familiar with the negotiations said Feb 26 that creditors granted Fortress Investment Group LLC another delay on an auction, as the firm and its lenders continue talks to rework its debt.

In January, creditors who lent US$1.4 billion to Intrawest effectively seized control of the company and tried to auction off its assets.

The new auction date is believed to be March 1, after the Games have officially ended, if indeed it happens at all.

In 2006, Wall Street hedge fund Fortress bought Intrawest in a $2.8-billion deal. In December, Fortress missed a $524-million debt payment connected to that purchase.

Wall Street firms Lehman Brothers and Davidson Kempner Capital are the primary lenders involved in the process.

The deeply indebted private equity group has been trying rearrange its financial affairs to hold on to at least partial ownership of Intrawest’s eight resorts.

Over the last three months, Intrawest has sold the Panorama ski resort in eastern BC, a Florida golf resort, and the Squaw Valley ski hill in California, all to raise cash to pay lenders.

“They’re trying hard to get enough money together to satisfy the creditors but I personally think it’s unlikely they'll succeed,” James Brander, a commerce professor at the University of British Columbia, told CBC News.

Brander said that he suspects Fortress has been trying to scrape together enough money to convince creditors to ease the terms of the loans and avoid foreclosure. He said the strategy might also work for the creditors to wait in order to attract more potential buyers.

Financially troubled Intrawest ULC announced Jan 28 that it has sold the Panorama Mountain Village ski resort in Invermere, BC, to a group of buyers.

The group, Panorama Mountain Village Inc, said the deal would include the resort’s on-mountain and Nordic ski operations, a 50 percent ownership position in the Greywolf Golf Course, all of Intrawest’s commercial operations and lodging units in the village, and the land available for real estate development. The resort is one of the largest employers in the region.

In late January, Wall Street financiers announced they were going to put up for sale another high-profile Intrawest asset, the Whistler Blackcomb resort near Vancouver, while the facility was hosting Winter Olympic events.

Ian Galbraith, director of corporate communications with Intrawest, said the decision to sell was based on the fact that Panorama no longer fits with its strategy. He said it now intends to focus on Whistler Blackcomb, Mont Tremblant in Quebec and Blue Mountain in Ontario.

The Globe report also quoted unnamed sources in Calgary’s financial community as saying Intrawest’s biggest domestic rival, Vancouver-based Resorts of the Canadian Rockies, will not be a bidder in the auction. RCR is controlled by Calgary oil executive Murray Edwards and owns six properties in BC, Alberta and Quebec.

Further complicating the sale was a report that appeared in the New York Post on Feb 1 alleging that Fortress Investments wants the Canadian government to put up US$90 million or it would sue.

Although the Canadian government denies it is negotiating a payout to the owners of the giant ski resort and Olympics venue, the Post quoted Fortress Investments LLC as saying Ottawa had promised to compensate it for the time Whistler Blackcomb was used for the Olympics.

Yet the federal government maintained in early February that no negotiations were underway.

At no time has the government of Canada been approached for any sort of payment, insisted Deirdre McCracken, a spokeswoman for Heritage Minister James Moore.

There is no contract between the government of Canada and the owners of Whistler Blackcomb, the site of alpine skiing events during the games, McCracken added.

Nevertheless, Intrawest CEO Bill Jensen said in a statement that the company “has a 2002 agreement with VANOC (the Olympic organizing committee) to host the Winter Olympics at Whistler Blackcomb and have every confidence that VANOC will honour its financial commitments.”

Galbraith also told CBC News that the terms of the agreement have not been made public but described it as a “make whole" agreement -- a term used in business circles to describe compensation for losses.

The New York Post also reported that Fortress is offering cash to lenders of Intrawest in an offer to creditors that would give it more than two years to pull Intrawest out of its financial troubles.

Lenders had set a deadline of Feb 19 — in the middle of the Games — to foreclose on Intrawest if they did not get more money from a deal to rearrange Intrawest’s debt.

Brander, meanwhile, has called the report that Fortress is looking for US$90 million “credible”.

“It’s not the slightest bit surprising that Fortress seems to be using brinkmanship … That has certainly happened with Olympics before,” he noted. “Sometimes governments give in to that. More commonly, they don’t,” he said, adding that he expects that Fortress will end up losing the Intrawest assets including not only Whistler but also Mont Tremblant in Quebec and Blue Mountain in Ontario.