MAINE-BASED SKI RESORT FIRM GETS $150 MILLION INFUSION
Jo-Ann Johnston
Times Union - Tulsa, Oklahoma 08/10/1999
used with permission

The financially troubled American Skiing Co., which owns Killington, Mount Snow and Sugarbush, received a $150 million infusion of cash that will help the company out of its immediate difficulties but will mean handing over control to Texas billionaire Robert M. Bass.

As part of the deal, founder and chairman Leslie B. Otten, will no longer maintain a controlling share in the publicly held company.

The company was burdened by debt it had accumulated during a buying spree between 1994 and 1997. The strategy was to own enough resorts to achieve some economies of scales that would hold down lift prices and costs.

The $150 million cash infusion came from Oak Hill Captial partners, an equity firm run by Bass, according to American Skiing spokesman Skip King. Bass' company now owns 47 percent, a controlling stake in the company.

The money is going to let American Skiing continue its real estate projects -- condos and timeshares -- intended to generate income year round for the company from vacationers.

"We view our real competition as theme parks and cruise lines," King said. The company is in the broad vacation, leisure time business, he said, not just skiing and snowboarding.

But skiing alone is a capital intensive business, and real estate is even more so. After last year's double whammy mild winter in both the Northeast and Rocky Mountain properties, the company suffered losses in both its second and third fiscal quarters. And it already had $400 million in debt.

The company needed more cash to keep the real estate project going and to sustain the momentum of its strategy, King said. Otherwise, it would have lost its edge, he said.

The money will help, said Christine Lumpkins, an analyst with Bear Stearns. She currently has a "lukewarm recommendation" on the stock, which went public at $18 in 1997, and closed yesterday at $4.44, up 6 cents.

"Yes, it's enough to support them, but it's not like they're going to have a huge financial cushion," Lumpkins said.Lumpkins also worries whether current management, headed by Otten, has the background to run a real estate company, even thogh they've been savvy ski-resort operators "in one of the most challenging markets -- the Northeast."

"They have less experience in terms of real estate development," she said.

Certainly Oak Hill could change the management team if it wants. In accepting the $150 million cash infusion, Otten and his executives agreed to shrink its ownership stake in the company from 51 percent to 27 percent, with Oak Hill owning 47 percent.

Lumpkins is one of the people who believes it's smart for the ski industry to consolidate and build bigger companies. Consumers expect more and more when they go on vacation, and companies need deep pockets to fund improvements, she said. As long as companies have a variety of properties, appealing to different geographic and skill markets, the strategy should work, she said.

Meanwhile, competitive ski operations in New York are following their own plans. Many are expanding and improving their operations, said Rob Megnin, president of the Ski Areas of New York, a trade association.

"If you're going to stay in business, you've got to constantly update your snowmaking and lifts," he said.

Bristol Mountain, in Canandaigua, outside Rochester, even got state help for its $4.2 million expansion. Empire State Development said the ski resort can get a $125,000 grant and another $125,000 in the form of a loan, for preserving and creating new jobs.

Gore Mountain, operated by the state, is putting in a new gondola to cut waiting times on lift lines. The adult-peak lift fee will be $44 in the coming season, up $5 from last year.

Hunter Mountain, by contrast, privately owned by the Slutsky family, this year held off on building a new learning center geared at attracting more beginning skiers. The resort hopes to move forward next spring, said Tim Newhart, director of marketing and sales.

Hunter prefers to fund its expansions from cash flow, instead of using borrowed money, and last year's poor season just couldn't finance the project, he said. And since this is a long-term strategy at Hunter to keep bringing back beginners, it was was OK to wait, he said.

Besides, the theory that economies of scale will keep down ticket prices "has yet to prove itself," Newhart said. Bigger operations might get better prices on food and beverage, he said, but not on labor or capital costs.

The peak-adult lift price at Hunter was $44 last year, and should be within a dollar more of that in the coming year, he said.

Name: American Skiing Co.

Headquarters: Newry, Maine

Resorts: Killington, Mount Snow and Sugarbush in Vermont; Sunday River and Sugarloaf/USA in Maine; Attitash Bear Peak in New Hampshire; Steamboat in Colorado; The Canyons in Utah; Heavenly on California/Nevada border.
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