Reports from New York confirm that talks between the two hedge fund owners, Fortress Investment Group and Davidson Kempner have reached an impasse. With Intrawest late on a $524 million debt payment, it now appears that the Canadian government may need to step in to save the 2010 Winter Olympic Games.
Not the kind of news that Olympic organizers need with just over a month before the opening ceremonies.
On January 3, 2010, the New York Post reported that a lenders' consortium spearheaded by Davidson Kempner had snubbed a proposal from Fortress Investment Group to restructure the debt of Intrawest, a resort company that the Wesley Edens-led hedge fund acquired for $2.75 billion in 2006.
Intrawest, which owns ski resort Whistler-Blackcomb in British Columbia, will host the Winter Olympics next month, but has breached covenants on a $524-million debt.
According to the Post, a source familiar with the matter said both sides could be waiting for the Canadian government to step in at the last minute and prevent Intrawest from going into receivership ahead of the Feb. 12 start of the Olympics.
Ironically, the federal Conservatives under Prime Minister Stephen Harper have suspended (prorogued) Parliament until after the Winter Olympics.
I can't imagine that the Canadian government would actually "un-prorogue" parliament to bail out a New York-based firm that manages private equity funds and hedge funds. This is even worse than the American government bailing out banks and domestic auto makers.
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The Owe-lympics are predicted to cost Canadian taxpayers over $6 billion already. It will be interesting to see what the "real" economic benefits will be from the games.
Residents of North America's No. 1 already know that Intrawest has tightened its belt in the past year. This season, the mountain hired significantly less seasonal workers, and sold several resorts in Colorado and Florida.
According to sources, Whistler Blackcomb has issued stop-work orders for the alpine venues since VANOC has failed to pay outstanding invoices. The P1 level of the Creekside Parkade, across from the Olympic downhill venues was closed and turned over to VANOC on Nov. 15, but was quickly reopened by Intrawest to allow for increased public parking and revenues.
Many local residents would love to see Fortress sell their stake in the ski resort, so that Whistler-Blackcomb could finally end up in the hands of the people that actually know something about the ski industry.
Ideally, the Resort Municipality of Whistler should buy it, but with the debt load from the Olympic games, the economic downturn and decreased tourist visits, the municipality is in no position to purchase its greatest asset.
If Whistler's mayor thinks that this was "the toughest year of his professional life in politics", he ain't seen nothing yet - that's if he finishes his full three-year term until 2011.
