Saturday, March 23, 2002
Steamboat Springs American Skiing Company is plainly confronted with the possibility of defaulting on several large loans this spring, and it is possible the company will have to go back to its creditors for more concessions even if it is successful in closing the sale of the Steamboat Ski Area.
"The ultimate success of (our) comprehensive strategic plan is dependent on the execution of the remaining plan elements, in particular the sale of Steamboat or another resort to significantly reduce leverage and improve our ability to meet our obligations under our credit facilities," ASC executives wrote in documents filed with the Securities and Exchange Commission this week.
ASC reached an agreement Feb. 1 to sell Steamboat for $91.4 million to Triple Peaks, LLC, led by Tim and Diane Mueller. The company is banking heavily on the transaction, which has yet to close.
"The failure to consummate a transaction that will enable us to significantly reduce our leverage may have significant adverse effects on our future liquidity, operating performance and results," ASC executives wrote.
American Skiing has more than $300 million in net debt. The biggest single piece is a $156.1 million senior credit facility with Fleet Bank. The loan consists of $94.6 million in revolving credit and a $61.5 million term loan.
On Jan. 14, ASC took out an additional $7.2 million loan or "sub-tranche," in order to pay the Jan. 15 interest payment due on senior subordinated notes.
ASC was able to assign $2.2 million to the capital on the term portion of its senior note, and another $54 million to the revolving credit as a result of its sale of Sugarbush resort in Sept., 2001.
ASC's Chief financial Officer Mark Miller estimates that the company will have to renegotiate the amount of money available under its revolving credit loan prior to Aug. 1. That's because he projects the balance in the fund will hit zero in August.
ASC uses the revolving credit facility to bridge the cash flow gap between the end of one ski season and the beginning of the next.
"We currently anticipate renegotiating these terms in conjunction with our sale of a significant asset (Steamboat or another ski area)," ASC executives wrote in their lengthy filing with the SEC.
Other insights into ASC's financial condition provided by last week's filing include:
n ASC has one $7.2 million sub-tranche to its senior loan with Fleet National Bank that bears interest at a fixed rate of 17.5 percent.
n ASC has a provision in its loan that calls for it to pay interest on interest. For example, on Dec. 24, 2001, ASC failed to make an optional prepayment on deferred interest and the company is obligated to pay an additional 2 percent on that money.
ASC executives are negotiating with Fleet Bank to have that obligation waived in the event they can sell Steamboat or another ski area.
As of Jan. 27, the company had accumulated $2 million in deferred interest.
n In the event that it cannot complete the sale of Steamboat by the end of the third fiscal quarter (at the end of April) ASC is working on "alternative strategies" to preserve its liquidity.
In their filing with the SEC, ASC executives lay out the consequences of failure: "If we were not able to successfully execute one or more of these alternative strategies and manage to repay the amounts outstanding under our senior credit facility, when due and payable, our lenders would have the right to proceed against the collateral granted to them to secure such indebtedness."
n ASC also anticipates it may be unable to meet all of its obligations to creditors on the real estate side of its business. One option they are considering, should they be unable to make payments on their real estate debt is a "consensual transfer of control (by American Skiing Company Resort Properties) of all or a portion of assets that are pledged as collateral to these facilities."
Although ASC officials say they are optimistic about their ability to close the sale of the Steamboat Ski Area within 30 days, the Steamboat Grand Hotel is not part of the deal.
CEO B.J. Fair said on Feb. 1 it is his company's intent to retain ownership of the hotel and conference center.
However, sales and identification of new sales leads at both the Steamboat Grand and a similar hotel and condominiums at the Canyons Resort near Park City, Utah, have been a disappointment this winter.
"Over the past several months we have experienced a reduction in sales volume and sales leads at Steamboat and The Canyons," ASC officials wrote in their report to the SEC.
They attributed the downturn to a weakening economy and weakness in the Utah marketplace due to the Olympics.
"The sales at Steamboat and The Canyons Grand Summit were significantly less than anticipated. Our real estate segment generated a loss before income taxes of $10.9 million for the 26-week period ended Jan. 27, 2002."
ASC has been forced to seek to renegotiate the terms of a $10 million loan with TFC Textron Financial, which was arranged in July 2000 solely for the purpose of funding completion of the Steamboat Grand.
The balance of the note with TFC Textron is $2.6 million and matures March 31.
"Discussions have begun with the holder of the note to extend the maturity date," ASC officials report.
"We do not anticipate being able to retire this note at maturity."
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