Steamboat Springs American Skiing Co. Chairman Les Otten says he's not going anywhere anytime soon, and his confidence in a plan to reverse company losses of $52.4 million in 2000 remains unshaken.
"I'm in for the long haul," Otten said. "What I can tell you is we're confident the plan we put forward is on track. We think that was a competent, well thought-out business plan for the upcoming year."
Otten was speaking from his office in Newry, Maine, the day before he boarded a plane to visit Steamboat for the grand opening party of the Steamboat Grand Hotel.
Otten and key officers of the publicly traded American Skiing Co. outline their plan to turn the company around during a conference call with investment analysts in October. They pinned their hopes for improving the company's financial fortunes on a return to normal weather patterns i.e. abundant snow and their ability to sell real estate at their ski resorts. ASC owns nine different ski resorts nationwide, but the Steamboat Grand Hotel, which opened Oct. 2, plays a key role in those plans.
An article by Tim McLaughlin and circulated by the Reuters wire service implied that the company's $458 million in debt has squeezed cash flow and threatens Otten's future as chairman of the board. The next six months will prove critical to the future of the company and of Otten, the article implied.
Otten was reluctant to respond directly to the charges in the article.
"He (McLaughlin) took information that was six and 18 months old and reformatted it into a story," Otten said. "We don't think we need to respond."
Predictions about Otten's personal fate with the company are based upon the fact that over the summer, Otten obtained $15 million in financing from Texas billionaire Robert Bass' Oak Hill Partners L.P. in exchange for the right to appoint a majority of the ASC board of directors. The $15 million was acquired a year after Oak Hill invested $150 million in ASC.
American Skiing Co. is not just in debt to the tune of $450 million some of that debt comes at a very dear price, including a bond of $120 million that is financed at an interest rate of 12 percent.
Particularly stinging was a quote in the article from a stock analyst with Credit Lyonnias Securities Inc., which predicted investors won't return to the company until they can be "certain the individuals responsible for creating the mess at American Skiing are no longer employed there."
Otten said the quote predated his hiring of ASC's Chief Financial Officer Mark Miller and Hernan Martinez to fill the newly created post of chief operating officer at American Skiing Co. Resort Properties. Otten said those hirings are an important part of the plan to return ASC to profitability.
Otten agreed that the next six months are critical to his company, but he stopped short of saying the company is in critical condition.
"I would differentiate between being in the I.C.U." and facing a critical period in the company's history, Otten said. "The patient's not critical, but we identified selling down real estate as being critical to the company."
During the conference call in October, Otten said the company would attempt to de-leverage real estate debt by about $40 million in 2001 through sales of townhomes, quartershares of hotel units and other real estate parcels. That would be accomplished by selling existing real estate at The Canyons in Utah and at the Steamboat Grand. At the time, Otten said 70 percent of the Steamboat Grand remained to be sold.
The Steamboat Grand has averaged about 16 real estate closings a week in late November, but Senior Vice President of Real Estate Scott Oldakowski, who was transferred to Steamboat from The Canyons at Otten's bidding, would not be specific about how many hotel units or quartershares remain to be sold and how much residual value they represented.
Otten said in October that the Steamboat Grand closed $8 million soon after it opened, with another $26 million under contract. Another $3 million to $4 million might close before the end of the year, Otten said at the time.
"We had $40 million ready to close, all we had to do is deliver the building," Otten said.
Asked why pre-sales at the Steamboat Grand had not gone better in Steamboat's already hot real estate market, Otten said construction delays and negativity regarding the hotel in the Steamboat community combined to make the hotel difficult to sell before it was finally completed and operating.
"Typically, you do very well selling (timeshares or quartershares in the case of the Steamboat Grand) prior to putting a shovel into the ground," Otten said. "Our company was not in the best position to sell anything (last year)."
During the protracted construction phase, Otten said potential buyers were left to wonder exactly what the finished project would look like and "was it going to be ugly?"
Otten said he didn't want to sound defensive, but negativity within Steamboat Springs about the hotel, previously known as the Grand Summit, hurt the company's efforts.
"People were calling it the Grand Slummit," Otten observed.
"All of those things that worked negatively against the project we brought on ourselves," Otten said. "Now, we're very hopeful."