American Skiing Company gets new partner
A $150 million agreement, announced Monday, is expected to infuse American Skiing Company with new financial energy and could perk up South Lake Tahoe redevelopment negotiations.
The Maine-based ski company, owner of Heavenly Ski Resort, signed an agreement to sell 48.5 percent of its stock to Oak Hill Capital Partners, L.P., a private equity investment group.
Proceeds from the agreement will be used to reduce indebtedness, estimated in April at more than $400 million. The agreement should enable ASC to continue to pursue its growth plans, which include development in the South Lake Tahoe’s Park Avenue Redevelopment Project and capital improvements to Heavenly.
“We’re pretty excited around here,” said Stan Hansen, Heavenly’s vice president of governmental affairs. “Oak Hill is a very good group to be working with.”
Heavenly and ASC are the major investors for the Park Avenue Redevelopment Project, which includes a gondola connecting the state line area to the ski resort, an ASC Grand Summit resort and the Lake Tahoe Inn.
Heavenly is preparing a disposition and development agreement, which ensures that the city of South Lake Tahoe is not left holding the financial bag if the redevelopment project fails to materialize.
“It’s nice for us going into our negotiations next week,” Hansen said.
The ASC/Oak Hill partnership is expected to improve financial confidence in the ski company as a whole.
ASC has been weighed down in debt following poor snow conditions in the northeast and a late season in the Midwest. ASC stocks, which closed Monday just under $5 per share, plummeted from 13 7/8 per share a year ago to a low of 2 3/8 in April. Some financial analysts began to question ASC’s ability to see its extensive real estate and capital improvement plans through to completion.
“This investment stabilizes our capital structure and provides the company with substantial liquidity,” said Leslie B. Otten, the founder of American Skiing Company who will maintain his position as chief executive officer. “We could not ask for a better or more capable partner than Oak Hill and we believe this strategy with an enhanced capital base will deliver significant value to our shareholders.”
Following regulatory and lender approval, expected by the end of August, Oak Hill will become the largest single shareholder in ASC. The ski company’s senior management will hold 26.7 percent of the shares while maintaining direct control of the company.
“They are an investment company, pure and simple,” said ASC spokesman Skip King. “We will continue to run the company and they’ll have a presence on our board.”
Analyst Christine Lumpkins of Bear, Stearns & Co. in New York, told Reuters Security that the capital infusion was a positive step but she was “a little bit” surprised the investment was not accompanied by demands for operational or managerial changes.
“(ASC knows) how to run great ski operations …,” Lumpkins said. “But a lot of their growth is expected to come from real estate development, which is an area where they have less experience.”
Oak Hill Capital Partners is a $1.6 billion private equity partnership managed by Oak Hill Management, Inc., based in New York and Menlo Park, Calif. The company makes significant investments through acquisitions, build-ups, recapitalizations, restructuring, strategic joint ventures and purchase of minority stakes in a wide range of industries.
American Skiing operates ski, snowboard and golf resorts, including Sugarbush, Killington and Mount Snow in Vermont, Sunday River and Sugarloaf USA in Maine, Attitash Bear Peak in New Hampshire, The Canyons in Utah, Steamboat in Colorado, as well as Heavenly.
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