Revenue growth for ASC
But Steamboat Ski Area's parent company's high-interest debt persists
June 17, 2005
American Skiing Co. officials this week reported $16 million in revenue growth during the past 10 months, largely because of the success of a program that offered East Coast skiers the ability to ski five resorts on a single season pass.
However, the company’s optimism on the resort side has to be tempered by the high interest rates it is paying on some of its debt.
“We were very pleased with the success of our All for One Pass in generating incremental skier visits and introducing new skiers to our resorts,” ASC Chief Financial Officer Betsy Wallace said. “The financial boost of the All for One Pass, coupled with higher guest spending, resulted in strong resort revenue increase.”
Wallace made her remarks when ASC, which is the parent company of Steamboat Ski and Resort Corp. and six others ski areas, issued its third-quarter earnings report this week.
Five of ASC’s resorts are in New England, where snow conditions through most of January were marginal. However, ASC was able to gain the loyalty of skiers with its multi-resort pass, and when heavy snows arrived in February and March, it reaped the benefits.
ASC was able to negotiate more favorable terms for its senior loans last fall. However, the cost of deferring an impending date to redeem millions of dollars in preferred stock was double-digit interest rates.
As part of its refinancing, ASC bought time to delay paying off the obligations represented by the preferred shares. The preferred stock was exchanged for $76.7 million in junior loans that aren’t due until 2012. The opening interest rate on the $76.7 million in loans is 11.25 percent. It will increase gradually to 13 percent in 2012. However, the amount of the loan also will increase over time as interest is added to the principal on the first day of each year. On Jan. 1, $900,000 of interest was added to the principal.
ASC was not required to pledge any of its assets as collateral for repayment of the junior loans. The new loans are subordinated to all of ASC’s other debt obligations.
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