Intrawest, in and out of the fog (via @miss604)
Forced to sell assets to pay down debt, Intrawest announced the sale of Panorama Mountain Village last week. That was the story is sooo last week. It all seemed like such a simple path. Sell assets, pay down debt. Foreclosure and further asset sales still looming. But, it has always been more complicated than that from a ‘Finance’ perspective.
And, I am thinking a few people will not be impressed with the following scenario.
Fortress to Lenders : Here’s some pocket change. Let’s Make a Deal!?
The New York Post, on information from unnamed sources, is reporting, “In a bid to fend off foreclosure, hedge fund Fortress is offering cash to lenders of Intrawest, the resort company that owns venues for the 2010 Winter Olympics, sources told The Post …”(*1). In return, “Fortress wants the principal to be pushed out for more than two years, while it maintains almost complete ownership of Intrawest“(*1). A further part of the deal would have Fortress paying higher interest rates on said principal.
Meanwhile, the lenders have apparently been approached by several investors looking to buy pieces of Intrawest. The lenders therefore have to question whether they could get more money back that way, through the repossession and sale of further assets, or further their relationship with Fortress, and negotiate a new deal to extend the debt payment period … AGAIN.
Will Fortress be able to renegotiate a deal?
With the history involved in this situation, you wouldn’t think so, you really wouldn’t. But, this is the world of Finance, and apparently it is quite probable. “Sources close to both sides said they believe Fortress and the lenders will likely reach a deal“(*1). In fact, “If Fortress pulls it off, it would be similar to its reported plan to spend $125 million from its fund to pay down debt at railroad operator Florida East Coast Industries to keep it from being repossessed”(*1). So, yeah, it can definitely can be done.
The Kicker, Fortress(U.S.) to Canada : You owe us $90 million or else!
So, if Fortress is able to negotiate their way to maintaining ‘almost complete ownership of Intrawest’, then the Canadian Government may be on the hook for $90 million. Say what?
“… Fortress says it is negotiating with the Canadian government, which it says promised to make it whole for the time Whistler/Blackcomb mountain is used for the Olympics. Intrawest is trying to get roughly $90 million, and wants to be paid before the Games start on Feb. 12, a source said.
If it does not get paid, Fortress plans to start legal proceedings, the source added. It is unclear if that could disrupt the Winter Olympics”(*1). )
(insert #BlameTheOlympics here).
So, Fortress negotiates the deal, maintains ‘almost complete ownership of Intrawest’, for which we pay them $90 million, to help stave off Intrawest’s foreclosure. And, that money is gone for us. It doesn’t sound like we get it back. In the meantime, even if Fortress folds on the deal again in two years, they were able to generate revenue from Intrawest during that period. Welcome to the world of Finance. If this story comes to fruition, Fortress will be looking like calculated, smart cookies, capable of holding on to assets they can’t pay for, while the Canadian Government looks like they got caught with their pants down.
Sources:
1. Ski venue’s cold cash, New York Post, Jan.31, 2010