Excerptcize

CBC and The New York Post both have stories up at their sites discussing the potential future of Intrawest, the company that owns the Whistler-Blackcomb ski resort that will play host to the alpine events during the 2010 Olympics. The whole scenario is a somewhat confusing mix of creditors and debt holders, so you should just go and read either of the articles, but there seems to me to be two different elements to this story. The first angle is the leveraged buyout of Intrawest that occurred in 2006 by the hedge fund Fortress Investment Group. This purchase was highly leveraged, and wouldn’t you know it, the Lehman Brothers happen to be one of the creditors in that deal (you remember the Lehman Brothers, right?) Fortress recently missed a $524 million payment on the debt incurred during the purchase of Intrawest. As Lehman is currently restructuring under bankruptcy protection, they are looking for funds wherever they can find it to make good on the more $1ooo billion creditor claims against them. As such, they have indicated that they could foreclose against Intrawest as early as February 19th (right in the middle of the games) and begin to auction of it’s assets (including Whistler-Blackcomb.)

Further to Fortress’s tangling with Lehman Brothers, the hedge fund has also been sparring with VANOC/the Canadian Government. According to the New York Post,

VANOC guaranteed that it would make Intrawest whole for the time that its events take place at its resorts. But now, according to a source, Canadian officials are threatening to pull that roughly $50 million guarantee. That, the source said, has compelled [Fortress fund manager Wesley] Edens to privately say he has a legal right to keep the Games from taking place at Whistler.

There’s nothing like a sexy story about the possibility of Olympic events not taking place! I do think that it is important to give credence to what Bill Singer, a securities lawyer in New York had to say to the CBC:

I can’t imagine that it will ultimately mean much, because I would assume between [Canadian] government interest and the Olympic Committee there would be something that would be accomplished just to forestall [this.]

For their part, Intrawest had this to say:

We have a 2002 agreement with VANOC to host the Winter Olympics and have every confidence that VANOC will honour its financial commitments. Intrawest is looking forward to a successful Olympic Games.

The word ‘bankruptcy’ is a loaded one in the English language, and it carries even more weight these days in light of the past few years of economic turmoil. It is easy to forget that well established procedures are in place for navigating corporate entities through bankruptcy protection, and more often than not they emerge from protection as a viable company. And while this story is an interesting one that deserves to be followed, I too, in my extremely limited understanding of financial wizardry would not expect this current story to prevent a successful games from happening.

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