Stock shares converted to debt
American Skiing says constraints on capital spending loosened
American Skiing Co. officials said they expect to nearly double the company’s capital budget for improvements at their seven ski resorts, including the Steamboat Ski Area.
The decision comes after ASC was able to restructure its $230 million senior loan this week.
A pair of new loans supplied by four lenders will reward the company for improved financial performance by loosening the conditions that allow ASC to reinvest cash in its resorts, said David Hirasawa, the company’s director of investor relations.
The old senior loan imposed “very finite limits” on how much money could be reinvested in the ski resorts, he said. Previously, the most ASC could invest in the combined seven resorts was $8.5 million annually, Hirasawa said. Now, barring a disastrous ski season, the company is assured of having $15.5 million available, and incentives for improved performance could move that number higher.
CEO B.J. Fair called the restructuring of the debt — two years before it came due — a milestone in the company’s history.
“The new facility (loan) provides management with the tools necessary for continued investment and sustainable growth,” Fair said.
ASC remains highly leveraged with more than $320 million in debt, which includes $76 million attributable to the conversion of preferred shares of stock to debt.
Madeleine LLC, an extension of the larger Cerberus investment firm had demanded redemption of the Series A preferred shares last spring. Madeleine owns all 36,600 of the Series A preferred shares.
ASC executives concluded that the company lacked “sufficient funds to legally” comply with that demand and instead negotiated an extension. ASC will accrue interest obligations to Madeleine beginning at 11.25 percent this year and increasing to 13 percent in 2012 when the full amount comes due.
The lenders on the new credit facility include Diamond Capital Management, Commercial and Industrial Finance, GE Commercial Finance and Credit Suisse First Boston.
Fair said the terms of the refinanced “senior credit facility” reflect growing confidence in ASC within the financial community. Hirasawa said lenders base their decision primarily on cash flow.
“The lenders are waving a carrot at us,” Hirasawa said. “We have significantly more flexibility, allowing us to plow more money back into the resorts where it belongs.”
Steamboat’s fiscal performance last year, coupled with growing revenue contributions from The Canyons near Park City, Utah, were major factors, Hirasawa said. Despite tough snow conditions in the East last year, ASC made headway there, too, Hirasawa said.
The skiing and riding public in the northeast responded to combined ski pass prices that allowed holders to ski at a couple of resorts on the same pass, Hirasawa said.
ASC posted revenues of $284 million in 2004 resulting in a net loss to shareholders of $28.5 million. The loss was trimmed by $25 million from 2003 levels. Most of that reduction was attributable to the sale of real estate at The Canyons.
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