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.