Intrawest sells second resort

David Ebner

Vancouver — Globe and Mail Update Published on Thursday, Jan. 28, 2010 1:53PM EST

Intrawest ULC has sold its Panorama Mountain Village resort, a move to fend off an auction of its assets as lenders demand repayment of debt from the company that owns 2010 Winter Olympics venue Whistler Blackcomb.

On Thursday morning, Intrawest announced it has sold Panorama, located in eastern British Columbia, 3 ½ hours west of Calgary. The buyer – price was not disclosed – is Panorama Mountain Village Inc., a new company run by B.C. real estate developer Rick Jensen and includes local Panorama homeowners and local business people.

Panorama is the second resort debt-heavy Intrawest has sold this ski season. Intrawest announced the sale of Copper Mountain in Colorado in November. The Vancouver-based company now owns eight ski resorts and one beach-golf resort in Florida.

The price of Copper, sold to Powdr Corp. of Utah, was not disclosed but estimated at about $100-million (U.S.).

Mr. Jensen, in an interview, said the Panorama price is far below the $100-million paid for Copper.

Intrawest was purchased by New York-based Fortress Investment Group LLC in 2006 for $2.8-billion at the peak of the U.S. real estate bubble. The $1.8-billion of equity was financed mostly with short-term debt. A last-minute extension on the debt was reached in October, 2008, during the financial crisis, and a shorter extension was offered last October. However, Intrawest eventually missed a $524-million payment and lenders have organized an auction of the assets for Feb. 19.

VANOC, the Olympics organizer, has said the alpine ski races set for Whistler Mountain won’t be affected.

One source close to Intrawest calls the auction “brinkmanship” and said talks between Fortress and lenders continue, though he did not say whether progress has been made.

The likely goal is to refinance the debt owed as well as pay down a portion of it, according to business professor Lindsay Meredith of Simon Fraser University. He called the planned auction by lenders a “hardball move in a game of high-stakes poker.”

Ahead of the auction, Fortress could put Intrawest into court protection from creditors – but that move would wipe out Fortress’s equity position in Intrawest.

According to a report by Bloomberg News this month, the equity is already nearly worthless, down 96 per cent from the purchase price in 2006, citing an unnamed source. Bloomberg also reported that Fortress proposed a plan in December to lenders that included Davidson Kempner Capital Management LLC and Oak Hill Advisors LP to exchange debt owed for a new five-year loan expiring in 2015.

The value of Intrawest’s debt traded this month at about 90 cents on the dollar, sources have said, which suggests lenders aren’t severely worried about the situation. Business at Intrawest’s main resort – Whistler Blackcomb – is better than expected this season.

“Fortress is cornered,” said Mr. Meredith. “The banks have pretty much had it with Fortress.”

Panorama buyer Mr. Jensen is a co-owner of New Dawn Developments Ltd., a builder based in Cranbrook, south of Panorama, in the East Kootenays. Mr. Jensen was mayor of Cranbrook from 1983 to 1990 and New Dawn started building for Intrawest at Panorama in 2000. Intrawest bought Panorama in 1993 when it was losing money and developed a Whistler-style village on a smaller scale at the base and improved the on-hill infrastructure.

Serious talks to buy Panorama started in September, Mr. Jensen said.

Last April, Intrawest CEO Bill Jensen – no relation to the Panorama buyer – said the company was looking to sell “some assets.” He suggested Mont Tremblant, north of Montreal, could become a standalone company. He also said Copper Mountain was one area the company wanted to keep, but added debt reduction was the top priority and all options were possible.

“We have to take every step to survive,” he told the Colorado-based Summit Daily News last April at a ski conference.

Rick Jensen is the largest Panorama investor in a group that includes 17 others. There are no plans to expand beyond Panorama, but Mr. Jensen does want to add more real estate at the resort. The goal is to make Panorama the No 1 destination for families in Canada. Among the first ideas is to expand the beginner terrain and possibly add a new lift for it, which would provide a better mix on a large mountain known for its intermediate and advanced runs.

Mr. Jensen said Panorama attracts about 200,000 skier visits a season. That is roughly one-eighth of the traffic at Whistler-Blackcomb.

Intrawest sold Panorama because its strategy is to focus on larger resorts like Whistler-Blackcomb, said spokesman Ian Galbraith.

“The realities of the ski business today is you need strong marketing to global regions, places like Europe and Australia, and they’ll want to visit the bigger resorts,” said Mr. Galbraith.

The International Olympic Committee said Thursday it isn’t worried about Intrawest’s financial problems.

“We’ve received comforting words from VANOC,” Jacques Rogge, IOC president, said on a conference call with reporters, according to the Associated Press. “VANOC is not preoccupied by that, and I trust that they have found good solutions. I don’t think this will affect the games.”