Steamboat Springs American Skiing Co., parent of the Steamboat Ski Area, announced Friday it has refinanced more than $84 million in debt with terms that improve the possibility of making capital investments in its resorts.
"The new facility provides additional operational flexibility and a vehicle to take advantage of growth opportunities," ASC CEO B.J. Fair said. "This is a major step forward in the restructuring of the company."
ASC also said it would release long-overdue quarterly earnings reports within 10 working days. The reports are from the end of fiscal 2002 and the first quarter of fiscal 2003 (ending in late October 2002). The company forewarned investors the bottom line for the end of fiscal 2002 will take a substantial hit from writedowns attributable to poor performance by its real estate operations.
The company closed on its new $91.5 million senior secured credit facility on Feb. 14. It includes three separate pieces and replaces an $84.3 million loan formerly held by Fleet. Both the old loan and the new loan are secured by virtually all of ASC's resort assets.
Asked if the new loan involves an overall increase in the company's indebtedness, ASC's Erik Preusse said it instead reflects a shift of debt away from the revolving credit facility, placing more in long-term indebtedness.
The revolving credit facility is used to help meet the needs of the company's month-to-month operations. Preusse said the shift was deemed appropriate by the company's ongoing financial condition.
The new loan offers a lower interest rate and extends the amortization of the principle until June 15, 2006. It also loosens constraints on ASC's freedom to reinvest revenue in its ski resorts, including Killington, Vt., The Canyons, Utah, and Steamboat.
The loan includes a $40 million revolving credit facility and a $31.5 million term loan provided by GE Structured Finance and another $20 million term loan from CapitalSource LLC.
"The old facility had a strict limit on how much capital we could reinvest," Preusse said. "There is still a limit under the new facility, but if we exceed our financial goals, we get to invest more."
Preusse is the company's director of strategic planning and corporate communications. He said that, in addition to the better terms they offer, this month's deals have symbolic portent for the health of American Skiing Co. GESF and CapitalSource are nationally recognized as strong financial services, he said.
"To have them step up behind us we think sends a pretty strong message about our current business plan and our viability," Preusse said.
The refinancing has taken most of the attention of ASC's new chief financial officer, Betsy Wallace, since she joined the company in mid-December, Preusse said. Jeffrey Lupoff was the GESF managing director who led his company's transaction team. In a prepared statement, he said his company has formed a "solid working relationship" with ASC's senior management.
Although the new loans incurred fees, they also offer more favorable interest rates, Preusse said. The two pieces of the refinance package held by GESF carry a rate of prime plus 3.25 percent, about 7.5 percent today. The old loan carried a rate of 9.75 percent.
The fleet loan was renegotiated when ASC sold Heavenly Resort in California last spring, Preusse said. It should not be confused with a separate Fleet loan that is secured by undeveloped land at ASC's resorts, including the Tennis Meadows parcel at Steamboat. That loan is in default. Fleet has threatened foreclosure on that loan, but the deadline has been put off indefinitely. A second loan on ASC's real estate side, held by Textron, was previously renegotiated and is in good standing, Preusse said.
Preusse added the company's second-quarter earnings report should follow the overdue first quarter report within several weeks.