By Tom Ross, Staff Reporter
Steamboat Pilot
Wednesday, January 16, 2002
STEAMBOAT SPRINGS — American Skiing Co.'s bid to sell the Steamboat Ski Area is still alive — and there is more
than one suitor.
That news was revealed Tuesday in a report posted on the Internet by the independent financial ratings agency Moody's
Investors Service.
Attention on potential buyers has focused on Tim and Diane Mueller, owners of Okemo Mountain in Vermont, since
October when the couple signed a nonbinding letter of intent to purchase the ski area.
However, the perceived reluctance of the public to travel on ski vacations since the Sept. 11 terrorist attacks
and the economic recession have combined to tighten the capital markets and hampered the Muellers' ability to close
the deal.
ASC Chief Executive Officer B.J. Fair did not name the Muellers but did confirm in December that "difficulties"
in the capital markets are the reasons the signors of the letter of intent haven't been able to finalize the purchase
of Steamboat.
Moody's report did not imply the Muellers have dropped out of the bidding for Steamboat but confirmed a second
buyer is now active in the pursuit of the ski area.
Tim Mueller, who talked openly of his interest in purchasing Steamboat before signing the letter of intent, has
declined to comment since. ASC officials in Maine and officials at the Steamboat Ski Area also consistently decline
to name any names in the sale process.
However, two investment-banking firms — one in Minneapolis and one in San Francisco — were identified as finalists
in September, along with the Muellers. The San Francisco firm is Babcock and Brown and the Minneapolis firm is
Goldner Hawn Johnson & Morrison.
American Skiing is believed to have paid more than $100 million for the Steamboat Ski Area and related assets in
the joint purchase of Heavenly Valley, Calif., in 1997.
Now, Moody's reports ASC is involved in discussions with another interested buyer in addition to the Muellers.
"American Skiing remains in active negotiations with another potential buyer for Steamboat and is also considering
other alternatives to the Steamboat sale," Moody's reported. "If Steamboat is sold, the company is required
to apply the net proceeds towards debt reduction and will most likely be able to meet the financial covenants of
the recently amended senior credit facility for the 2002 fiscal year. If the Steamboat transaction does not occur,
it is highly likely that American Skiing will have to refinance its capital structure in order to avoid default."
Tuesday's report by Moody's was made to downgrade ASC's rating on its ability to pay back $280 million in senior
subordinated debt.
It was made on the belief that the lingering effects of Sept. 11 on the economy will continue to undermine ASC's
ability to recover from its debt.
Moody's issued a "negative ratings outlook" for ASC Tuesday based in part on its inability to sell Steamboat
by the end of 2001. Fair has said selling Steamboat is the key to the company's financial reorganization, and throughout
the fall, he continued to predict the deal was on schedule to close before Jan. 1.
Moody's foresees that cash flow generated by ASC's eight remaining ski areas will not be sufficient to keep the
company solvent.
In spite of a $30 million financing package from Oak Hill Capital partners, its largest investor, in the first
fiscal quarter of 2002, Moody's believes the company remains on shaky ground.
"The company's capital structure and liquidity position remain fragile and it is not expected that internally
generated cash flow will be able to cover operating expenses, working capital, interest and financing costs in
fiscal year 2002," Moody's projects.
Moody's decision to downgrade the debt of ASC and that of Vail Resorts came a day after Colorado Ski Country USA
revealed that in spite of a robust holiday season, statewide skier visits through December were off 13.83 percent.
Skier visits were off even more sharply — 15.13 percent — at resorts deemed to rely purely on "destination"
travelers. Those resorts include Aspen, Crested Butte, Steamboat and Telluride.
Statewide skier visits through December were 2.44 million compared to 2.83 million a year ago, a decline of almost
400,000.
A spokesman for the Steamboat Ski Area declined to discuss Steamboat's skier visits but said the report from Colorado
Ski Country USA did not come as a surprise.
Steamboat reported direct jet flights during the week before and after Christmas were booked nearly full. The early
downturn at Steamboat can be attributed to November and the first two weeks in December, Vice President of Marketing
Andy Wirth said.
Steamboat had to delay its opening by nine days because of a lack of snow. However, when the ski area did open,
it had turned the corner and actually accumulated above-average snow in November. The snow came too late to reverse
the reservations trend for the start of the season.
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