Reorganization at Intrawest

As posted here earlier in the week, Intrawest, owner of Whistler, Blackcomb and Panorama in the West, Blue Mountain in Ontario and Tremblant in Quebec is attempting to re-negotiate about $1.7 billion in bank debt.

We are of the opinion that Intrawest will be successful. However, to close the transaction, Intrawest will have to make certain commitments and abide by loan covenants (rules) that will put downward pressure on real estate prices in those markets in which Intrawest operates.

Intrawest will be paying considerably more in interest payments, which will curtail its ability to invest in new infrastructure for resorts. A reduction in infrastructure investment will limit growth.

Intrawest will also likely be required to reduce its debt by disposing of unsold condo inventory, and surplus land. It is very difficult to measure the amount of unsold inventory at each resort as a % of total product since Intrawest does not make this information public. The same measurement problem exists with the land bank Intrawest holds. However, we have completed site inspections at three Intrawest resorts - Tremblant, Blue Mountain and Whistler and are able to report that Intrawest has a seemingly vast inventory of both condos and land, particularly at its Tremblant resort. A fire sale of condos and land would likely result in at least a 10% immediate reduction in prices, and a reduction in rental income for existing investors.