Whistler lenders move to foreclose
Wall Street financiers say they are going to put the Whistler Blackcomb resort up for sale while the facility is hosting Winter Olympic events next month.
Creditors who have lent $1.4 billion US to the ski resort's owners, Intrawest ULC, have effectively seized control of the company and are attempting to auction off its assets.
Whistler Blackcomb, one of numerous ski resorts Intrawest owns in Canada and the U.S., is set to host major ski events at the Olympic Games next month.
On Tuesday, a notice of a public auction to be held Feb. 19, 2010, was published in newspapers in Canada and the United States, soliciting bids for a membership interest in Intrawest Holdings. Among the assets in the notice were "partnership interests in two resort properties located in Canada (Whistler and Blackcomb)."
In 2006, Wall Street hedge fund Fortress Investments LLC bought Intrawest in a $2.8-billion US deal. Fortress recently missed a $524 million debt payment connected to that purchase.
The primary lender on the Intrawest deal in 2006 was defunct investment bank Lehman Brothers. New York debt managers Davidson Kempner and Oak Hill Advisors also helped finance the deal, and a source familiar with the process told CBC News the major creditors are united in pursuing the auction process.
'It's business as usual.'— Intrawest CEO Bill Jensen
Typically, lenders are willing to work with borrowers to avoid foreclosure. But the lenders' inability to move the debt repayment plan along seems to have spurred this week's unexpected developments.
"What the lenders are saying is that we want to get this process going," bankruptcy lawyer Richard Jones said.
Jones, who worked on the high-profile restructurings of Air Canada, Olympia & York and Cadillac Fairview, suggested an application for creditor protection under the Companies' Creditors Arrangement Act could be the next step in the story, as Intrawest works to get its financial house in order.
A source familiar with the process told CBC News that the Games are not being used as a bargaining chip, since the auction will not happen until after the Games begin.
"There's always a chance, but it's a very minuscule chance," Dan Doyle, vice-president of the Vancouver Olympic committee, said Wednesday of the possibility a new owner could interfere with Olympic events.
Indeed, while the possibility exists of an owner refusing to host Olympic events, it's extremely unlikely to unfold, Jones said.
"One way or another that's not going to be allowed to happen," he said.
The issue is further complicated by a New York Post report that claims Vancouver Olympic organizers are considering pulling their financial backing of Intrawest as a result of the kerfuffle.
In February 2009, the City of Vancouver came under fire for agreeing to bankroll the $1 billion price tag to construct the athletes' village after Fortress backed out of that project because of cost overruns.
Fortress CEO Wes Edens believes he has a legal right to keep the Games from taking place at Whistler if Olympic officials withdraw their financial backing for Intrawest facilities now, the Post story says.
For its part, Intrawest poured cold water on the notion that the resort's participation in the Olympics is in doubt.
"We have a 2002 agreement with VANOC to host the Winter Olympics and have every confidence that VANOC will honour its financial commitments," Intrawest CEO Bill Jensen said. "Intrawest is looking forward to a successful Olympic Games."
Jensen confirmed Intrawest is in discussions with lenders regarding refinancing.
"Our company is generating strong cash flow from its resorts," Jensen said. "It's business as usual."
Calls to Fortress Investment Group LLC were not returned. A spokesman for Lehman Brothers had no official comment.
Behind-the-scenes efforts expected
Bill Singer, a securities lawyer with RRBD Law in New York, predicted efforts will be made behind the scenes to avoid foreclosure, at least until the Olympics are over, given the amount of money invested in the Games and their high international profile for Canada.
"I can't imagine that it will ultimately mean much," he told CBC News, "because I would assume between [Canadian] government interest and the Olympic Committee there would be something that would be accomplished just to forestall [this.]"
"What do you do with a ski resort in this economic market?" Singer said. "Who would be envisioned as likely becoming a buyer for these distressed properties, when the reports all over the United States as well as in Europe and other areas where there's skiing is that … traffic to both golf and ski resorts is down?"