Thursday, December 31, 2009

Intrawest Misses Loan Payment

Several newspapers in the past week or so including the Toronto Star, Globe and Mail and locally the Enterprise-Bulletin have run stories detailing Intrawest's inability to make a scheduled $524 million loan payment. The payment was due just prior to Xmas on a $1.4 billion dollar (U.S.) loan, the payment of which was due after Intrawest had already been given a 60 day extension.

The problem lies perhaps not so much with Intrawest as it does with Intrawest's parent owner, Fortress Investment Group LLC which bought Intrawest in 2006 for $2.8 billion of which 60% of the purchase price was borrowed. As with any leveraged buyout wherein a large percentage of the purchase price is financed, there is little room for a financial miss-step. Loan payments must be made and any significant drop in cash flow as is being experienced in the current economy can be a disaster. I know. I worked in such an environment back in the 90's where "cash was king." Sales had to be generated not just to ensure a profit, but more importantly to pay down debt.

Little known here locally is that 1 year after the purchase of Intrawest, Fortress, a private owned equity fund went public with an initial public offering (IPO) that instantly made the 5 principals of Fortress billionaires. By the end of the first day of trading on the New York Stock exchange, Fortress shares had climbed from $18.50 to $35.00 giving the 5 principals a combined worth of $10.7 billion U.S. Now just 3 years later, one of Fortress' investments (Intrawest) can't make a half a million dollar loan payment. Notwithstanding the fact that they too have taken a hit, maybe the 5 Fortress principals need to reach into their own pockets to help out a bit?

Check Google Finance and you will see that as of today's date, Fortress shares are now worth $4.47 U.S. The pitch of their stock's decline matches that of a black diamond ski run at an Intrawest Resort. This is just one of the countless stories that have help to create the financial meltdown we have witnessed over the past year.

Intrawest's woes will not likely be reflected here locally at Blue Mountain. It's business as usual, all runs are open and the resort has been packed through the holidays. That's a good thing as cash is indeed King!

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Rick relocated to Collingwood from Toronto in 1985 through a transfer with Goodyear Canada. In 1987 Rick was recruited by a major client of Goodyear’s, managing their Canadian business based in Barrie before moving to Chicago in 1992 as Vice President of Sales & Marketing. Upon returning to Canada in 1996, Rick ran an industrial products manufacturing company in Stratford, Ontario. In 1998 Rick returned to Collingwood with his two children. Rick is a licensed real estate Broker with Royal LePAGE Locations North in Collingwood and holds his MVA designation (Market Value Appraiser-Residential). He is an active volunteer in the community serving several years on the Board of Directors with the Collingwood Chamber of Commerce as Treasurer, 6 years on the Board of Directors for the Southern Georgian Bay Association of REALTORS® of which he is the Past President (2008) and currently serves on a committee with the Ontario Real Estate Association. Rick is a diverse executive manager with extensive experience in strategic planning, manufacturing, finance, human resources and quality assurance management.