Ski area for sale

Debt-ridden American Skiing hopes to find buyer this year

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— American Skiing Co. has decided to sell the Steamboat Ski Area along with all of its related assets as part of an overall strategy to get the company out from under crippling debt.

Company officials said Wednesday there is no one buyer in line to acquire the ski area. Instead, the marketing of the Steamboat Ski Area has been turned over to an investment banking company, Credit Suisse First Boston. The goal is to consummate a deal by the end of the year.

American Skiing Chief Executive Officer B.J. Fair said Wednesday the sale of Steamboat represents the company's best opportunity to reduce its debt load and realize growth potential by building out resort villages at its eight other ski areas.

Fair promised to continue operating the ski area as if it were not for sale and said American Skiing would continue to support the Steamboat Ski Area with money and human resources.

"Steamboat has done an excellent job creating its own strategic plan and determining how it's going to be successful going forward," Fair said. "We will continue to support it with all our resources. It's important to remain focused on the upcoming season. We don't believe you can give up on a resort if you put it up for sale."

The ski area is Routt County's largest seasonal employer, with more than 1,000 people on the payroll during the height of ski season.

George Noyer, president of the executive board of the Steamboat Springs Chamber Resort Association, said the pending sale isn't necessarily bad news.

"If anything, I would have some cautious optimism," Noyer said. "This is not surprising news. We've all been watching it. Making the news public makes it a sure thing."

Noyer said he does not expect news of the decision to sell to change the way the ski area operates over the short term.

"If you are preparing to sell, you want to make sure that asset is in as good shape as it can be," Noyer said. "My anticipation is that summer operations will go ahead at full speed and there will be no marketing letdown for the coming ski season."

All assets for sale

All of American Skiing Co.'s Steamboat properties including the ski area, most of which is on the Routt National Forest; the Steamboat Grand Hotel; undeveloped land in Tennis Meadows; and Steamboat Central Reservations are for sale. Steamboat is among the three largest of the nine ski areas owned by American Skiing. The others in the top three are Heavenly Valley, Calif., and Killington, Vt.

Other ski areas owned by American Skiing include Attitash Bear Peak, N.H.; Mount Snow and Sugarbush in Vermont; The Canyon in Park City, Utah; Sugarloaf/USA; and Sunday River, Me.

Fair said it's not his company's intent to split off different pieces of its assets in Steamboat, like the Steamboat Grand, and sell them individually.

"What we're going to be selling right now is an entire package," Fair said.

Steamboat Ski Area President Chris Diamond was attending a convention of Colorado Ski Country U.S.A. in south Denver Wednesday. He said he and his management team have been consulting with representatives of Credit Suisse First Boston for about a week on a marketing plan for the sale of the ski area.

Diamond said the ski area's budget for the coming winter, including the marketing and airline flight guarantee program, will remain in place.

Steamboat Ski Area has a $12.2 million capital improvement plan for the summer. That short-range plan remains in place, Diamond said. It includes replacing parts of the snowmaking system and relocation of a major snowboarding half-pipe.

"Steamboat, as a resort, really came to the top of the list," Fair said. "Steamboat was the resort that achieved the results we really needed. Steamboat has been a consistent performer."

The crown jewel

Although Steamboat Ski Area officials have said they expect skier day totals from the past winter to be off by more than 10 percent, the area has stayed above the 1 million skier-day level for more than five years. By that measure, Steamboat is the biggest of American Skiing's big three mountains.

Killington, Vt., has 200 trails on 1,160 acres of terrain, and sometimes goes over one million skier days. Heavenly has 82 trails on 4,800 acres, but reached 900,000 skier days, then retreated this year. Steamboat has 141 trails on 2,939 acres. Last winter's skier days won't be released until American Skiing's third-quarter earnings report is out.

One bond industry analyst said it's apparent American Skiing decided to sell its most valuable asset rather than go bankrupt.

"They're selling the crown jewel," Phelps Hoyt said. "They've decided they can get the best price for Steamboat and it's their best chance to survive as an independent company."

Hoyt follows American Skiing because he tracks junk bonds for KDP Investments in Montpelier, Vt.

He said in late March that although selling one of its ski areas was one of the options available to American Skiing to reverse its fortunes, he didn't think that course fit the operating history of Oak Hill Capital Partners.

Oak Hill acquired majority shares of American Skiing when it loaned the company $150 million in August 1999. Oak Hill is backed by financiers, the Bass brothers.

"Apparently, the Bass brothers aren't willing to put in as much money as the bankers wanted," Hoyt said. He added Oak Hill must have felt it was better to avoid bankruptcy by selling a major asset and keeping "a seat at the table."

Fair declined to discuss the decision to sell Steamboat in terms of it being a choice between the sale or bankruptcy. He said all of his company's interaction with its lenders have been supportive.

The decision to sell Steamboat was a result solely of the company's analysis of how best to meet its goals as a restructured company, Fair said. It was not the result of any problems at Steamboat.

Hoyt said it's important to note that bankruptcy would not signal disaster for American Skiing's ski areas. As sources of revenue, they would continue to operate through a bankruptcy, he said.

During a Wednesday conference call, American Skiing Chief Financial Officer Mark Miller said as part of the strategic reorganization of the company, it would ask to revise terms of its loans for both its resort operations and real estate divisions. In addition, the company plans to bring in another infusion of capital. He declined to name the source or the amount.

Fair said the roots of the decision to sell Steamboat go back to December, when it announced its planned merger with MeriStar Resorts and Hotels. MeriStar has contracts to manage brand name hotels all over the country. The acquisition of MeriStar was intended to stabilize American Skiing's year-round revenue stream. When the merger was called off in March 2001 (CEO Les Otten resigned five days later), the senior management team at American Skiing had to look at a new strategy for de-leveraging more than $40 million in debt, Fair said.

American Skiing's assets in Steamboat serve as collateral for the company's loans, and all proceeds of the sale will be applied exclusively to that debt, Fair said.

Potential price tag

American Skiing hasn't revealed exactly how much it paid for Steamboat in 1997, and the issue is clouded by the fact that it was packaged with Heavenly Valley for $300.5 million. However, it was thought at the time American Skiing paid considerably more than the rumored $110 million paid by Kamori Kanko to purchase the ski area in June 1990.

Fair said American Skiing has established a minimum it would accept based on how much money it needs to achieve its debt-reduction goals. Fair declined to name the bottom line.

Hoyt said he really doesn't have a good estimate of the Steamboat Ski Area's value.

"What could they get for this thing now? I don't know," Hoyt said. "With a slow economy, it's not a real favorably time to look at buying property."

Hoyt said he is using very rough numbers to create models of American Skiing's future performance, based on the transaction. Assuming Steamboat represented about 55 percent of the 1997 purchase, and Heavenly 45 percent, Hoyt is placing the purchase price at about $165 million and discounting the value to $150 million.

Steamboat has completed two terrain expansions since American Skiing purchased the ski area: Morningside Park and Pioneer Ridge. Hoyt said those major additions, each of which included a chairlift, don't really add to the sale price.

Fair, who grew up south of Littleton, said a significant portion of his heart remains in the state, but that as the company looked for ways to restructure and reduce debt, it became apparent selling Steamboat was the best option.

"The decision to sell Steamboat was a difficult one," he said. "If we had our druthers we wouldn't be selling it."

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