6
Foreclosure on the slopes
There is seemingly no place to escape foreclosure in North America. The ski resort where the Olympic downhill skiing events are being held may be sold at a foreclosure auction this Friday.
The Whistler Blackcomb resort is owned by Intrawest, whose parent company is the private equity firm/hedge fund Fortress Investment Group. The Wall Street bankers who lent money to Fortress have set a Friday deadline for Intrawest to come with the $524 million debt payment it missed in December:
The foreclosure notice indicates that the lenders intend to conduct a public auction of 100 per cent of the Intrawest assets on February 19, which would mean the sale of Whistler Blackcomb in the middle of the Olympics.
On CNBC today, Fortress CEO Dan Mudd said the company is still trying to manage its way out of this mess and is negotiating with the creditors (btw, the creditors include the now defunct Lehman Brothers). But it sounds like the talks are pretty nasty:
Mudd pretty much summed up the entire financial crisis when he said: "When you use a lot of leverage, obviously when the market turns down, you've got a big problem."
Yeah, and Fortress has another problem. Intrawest's travel company, Abercrombie & Kent, faces a $220 million lawsuit in Los Angeles. The 540 plantiffs are members of Abercrombie's "destination club":
...the plaintiffs allege that the club was a ruse because Abercrombie & Kent didn't operate the business, just licensed its name. Now, they allege, their memberships are worthless.
"Intrawest has been crying poverty, saying they don't have the money, have huge debt," said Brian Kabateck, managing partner at Kabateck Brown Kellner in Los Angeles, who filed suit in 2007 on behalf of the club members. "They may not be completely liquid, but we also know that the Canadian government has substantially worked with them in setting up the Olympics. They have an entire Olympic Village in Whistler and in Vancouver they're operating. They are hugely benefiting from the Olympics."
But it may not be enough to stop the foreclosure avalanche.
If the resort gets sold, a group of Whistler residents might be interested in buying a piece -- something like a Green Bay Packers arrangement. Maybe they'd be a little more prudent with the venue.
I've taken the time to read the allegations and responses. The paperwork that each member signed made it very clear that A&K was licensing its name and did not run or own the club. Again, it's a case of the last deep pocket standing for the plaintiff's attorneys to go after.
I've traveled with A&K. They're a first class organization.
By the way, this lawsuit is very similar to another filed in Illinois which was thrown out on summary judgment. A&K made the mistake of licensing its good name and not running the business. They are a victim just like the plaintiffs. They just happened to be the deep pocket left standing.
I guess it all depends on the contracts A&K signed with the customers or if the judge will be lenient to the plaintiffs. A 250k to 500k is a pretty steep upfront price, so I suspect the terms of the contracts will be important. You seem as though you have a stake in the company, stock owner, employee?
Nope, not a shareholder or employee, but I am interested in the company and other similar companies.
A&K actually didn't have members sign any paperwork, but the company that they licensed its name to did, and it was very clear in the paperwork that they weren't owned or managed by A&K.
Another inaccuracy in this is stating that A&K is owned by Intrawest. This is not the case. Only connection (other than historical) is Fortress owns Intrawest and also owns part of A&K. Intrawest does not own A&K.
So, A&K stopped the business and lent their name to the re-branded Tanner and Haily. Yet the brand name of A&K was heavily associated with Tanner and Haley. A welcome letter came from A&K and branded products. Also the article states "There were no disclaimers."
<a href="http://www.usatoday.com/travel/news/2007-08-03-abercrombie-and-kent-vs-h... target="_blank">Link</a>
The reporting on this stuff is pretty bad, because no one actually has the time to get into the details and read the filings, and it's a lot more interesting of a story to listen to a plaintiff's attorney rendition. There is a reason the similar lawsuit was dismisssed at summary judgment in Illinois.
The club was not associated with A&K originally, and A&K was never in the destination club business other than this licensing arrangement for a year or two. In other words, the club started out as Preferred Retreats IIRC, then they licensed the A&K name from A&K for a little over a year, and then A&K cancelled its license, because Tanner & Haley wasn't complying with the licensing agreement (stopped paying the fees and not putting the adequate disclosures on marketing materials). Basically, A&K complained to T&H numerous times about them not following the terms of the licensing agreement, and finally they cancelled it. However, it was absolutely clear in the legal documentation (i.e, membership documents) that T&H used that A&K did not own and operate the club.
