Bond Set

[hillbangin]

Park City Television @ ParkCityTV
Harris: bond set at 17.5 million must post by September 12.

[VermontGranola]

PLUS, $19 million by March of 2015 for the 2015-16 season. Thats $36.5 Million in cash that won't be going to new ANYTHING at Killington and Pico.

[Big Bob]

So it looks like Vail would get the Canyons for $6 million the second year. Much better deal for them!!

[Highway Star]

PLUS, $19 million by March of 2015 for the 2015-16 season. Thats $36.5 Million in cash that won't be going to new ANYTHING at Killington and Pico.

Yep, this is definitely one of the worst possible outcomes for us at Killington, we are pretty much screwed for the next few years. Hope you like your fixed grip Snowdon Quad, no South Ridge lift, and no Interconnect. Sigh. Really hope it doesn't negatively impact their overall operations as far as snowmaking budget, etc goes.

[rogman]

Here's the link in the Park City Record:
http://m.parkrecord.com/park/db_/conten ... d=q0H4eKnR

Bottom Line:
5 million rent x Triple damages
2.5 million attorneys fees.
------------------------------
17.5 million this year

There is no way POWDR will agree to that, however they will delay as long as possible until announcing their decision. So either Vail/POWDR come to a "reasonable" agreement, or PCMR is shuttered for the season.

Obviously, shuttering hurts all parties. I've no idea what PCMR has for debt obligations, but chances are they are better off eating those, than agreeing to that deal. Vail is damaged if there is no deal: obviously they are out the 5 million in rent or so that they would have collected, or whatever they'd have earned from taking over PCMR outright, but it doesn't stop there: Canyons earnings will be way off as well, since Park City isn't the only destination resort in the West, or even in Utah. People will go elsewhere. There are a lot of fixed costs in running a ski resort, if skier visits are off, say, 20% that doesn't mean the profits are off 20%, but way more than that. Marginal revenue and all that. Additionally, they'll have to offer more/better deals to entice visitors to Park City. As a publicly traded company, they will feel the heat.

So what I expect to happen is that Sept 12th, POWDR will announce they are not paying the bond, and then negotiations will resume. Whether anything will come of it, who knows? Both parties should be dope slapped at this point. Unfortunately, the judge can only dope slap POWDR.

The effect on Killington? Depends on the level of indebtedness of PCMR.

[VermontGranola]

Powdr does carry significant debt. According to the LinkedIn profile of Jennifer Botter, Powdr's former Chief Financial Officer & Senior Vice President of Finance, she "Recapitalized company with $670M in three separate credit facilities comprised of both debt and equity."

[Bubba]

PLUS, $19 million by March of 2015 for the 2015-16 season. Thats $36.5 Million in cash that won't be going to new ANYTHING at Killington and Pico.

I think that's a misreading of the decision. It looks to me as if the bond will be $17.5 million for this season and, if the case continues, it expands to $19 million for the following season. That's an incremental $1.5 million not an additional $19 million. I also believe it possible to post a portion of the bond in cash and insure the rest IF you can find a company to cover you. Surety bonds are done all the time, although I'm not sure if they're done for this reason or in this amount.

[rogman]

Powdr does carry significant debt. According to the LinkedIn profile of Jennifer Botter, Powdr's former Chief Financial Officer & Senior Vice President of Finance, she "Recapitalized company with $670M in three separate credit facilities comprised of both debt and equity."

$670M? That's an ASC level of indebtedness. I'm skeptical that it is anywhere near that high, POWDR doesn't behave like a company with the wolf at the door 24/7 as ASC did. I don't think we'd see the current level of re-investment if the debt were that high. However, it's a private company...

Regardless, the question is pretty simple for POWDR: which results in a better net (or minimizes the loss) for PCMR: operating with an effective rent of $17.5M, or shutting down, and paying the PCMR debts out of pocket. Again, my guess is they'll shut down, and blame Vail. That blame will gain traction if POWDR says they will pay $5M rent (the number the judge used). I'm assuming the gag order on negotiations is lifted at this point. At that point Vail has to explain to the community why they won't deal, and that's not where they want to be.

[rogman]

PLUS, $19 million by March of 2015 for the 2015-16 season. Thats $36.5 Million in cash that won't be going to new ANYTHING at Killington and Pico.

I think that's a misreading of the decision. It looks to me as if the bond will be $17.5 million for this season and, if the case continues, it expands to $19 million for the following season. That's an incremental $1.5 million not an additional $19 million. I also believe it possible to post a portion of the bond in cash and insure the rest IF you can find a company to cover you. Surety bonds are done all the time, although I'm not sure if they're done for this reason or in this amount.

I interpreted it the same way VG interpreted it:
3 x rent + court costs. EACH YEAR!
$1.5 million for the second years rent makes no sense.

[Highway Star]

Here's the link in the Park City Record:
http://m.parkrecord.com/park/db_/conten ... d=q0H4eKnR

Bottom Line:
5 million rent x Triple damages
2.5 million attorneys fees.
------------------------------
17.5 million this year

There is no way POWDR will agree to that, however they will delay as long as possible until announcing their decision. So either Vail/POWDR come to a "reasonable" agreement, or PCMR is shuttered for the season.

Obviously, shuttering hurts all parties. I've no idea what PCMR has for debt obligations, but chances are they are better off eating those, than agreeing to that deal. Vail is damaged if there is no deal: obviously they are out the 5 million in rent or so that they would have collected, or whatever they'd have earned from taking over PCMR outright, but it doesn't stop there: Canyons earnings will be way off as well, since Park City isn't the only destination resort in the West, or even in Utah. People will go elsewhere. There are a lot of fixed costs in running a ski resort, if skier visits are off, say, 20% that doesn't mean the profits are off 20%, but way more than that. Marginal revenue and all that. Additionally, they'll have to offer more/better deals to entice visitors to Park City. As a publicly traded company, they will feel the heat.

So what I expect to happen is that Sept 12th, POWDR will announce they are not paying the bond, and then negotiations will resume. Whether anything will come of it, who knows? Both parties should be dope slapped at this point. Unfortunately, the judge can only dope slap POWDR.

The effect on Killington? Depends on the level of indebtedness of PCMR.

It was my understanding that if they don't pay the bond, they lose their right to appeal the eviction decision that has already been made, and there is no new appeals trial date set on September 30th. Meaning they are done with any legal action to stay on the land.

I would assume they then go in into a damages hearing resulting in paying out for the past several seasons. Then POWDR is actually evicted from the land rather quickly, or they have to strike some sort of deal with Vail to keep operating by paying a large rent, which may in fact be less than the $17.5M bond, or some sort of sell out of the business, combined operations, or blended solution that they devise.

You have to follow the money. PCMR has always been Cumming's cash cow, he pulls millions of dollars in personal income out of it each year. The rest goes to pay on debt and capital improvements. $17.5M (or possibly more, in final damages) for one year of operations takes a big cut out of that, and might put him in the red, and he still loses the land after 2 years after coughing up an additional $19M. Does this make a high rent deal more attractive....I would think so.

This puts them back at square one. For it to not make sense to pay Vail's $11.25M+ rent, they would have to be able to profit enough from operations on the lower mountain, to the tune of $15M+. Assuming an optimistic profit margin of 30% and yield per visit of $200 (lots of lodging, meals, lessons/training), they would have to bring in 250,000 visits - certainly possible. Assuming an pessimistic profit margin of 20% and yield per visit of $150, they would have to bring in 500,000 visits - pretty unlikely. There is a remote possibly Vail could permit and install a 1000 ft vert fixed grip for return access to the Canyons by December, and devise some sort of access via shuttle onto their property from south side of town, there is already a road. The town lift is also not on POWDR's land, it may be possible to use that as an access point. So, Vail could offer limited and access, or you could get a PCMR ticket too and access through them. Quite the pain in the neck overall though.

Is there a bigger upside for them in a blended arrangement where Vail owns and operates the upper mountain, and POWDR runs the lower? Lets say that 90% of tickets sold are for upper mountain, and Vail gets 60% of that revenue (PCMR has to supply parking, base lodges, snowmaking), with a $60 ticket yield and 800k visits. Vail brings in roughly $26M revenue, so with a 40% profit margin, $10.4M profits. Pretty much all in the same ballpark, so its a wash.

While it seems like POWDR is willing to fight to the death, they are looking at some pretty firm numbers with a pretty stiff losing proposition. They may still do so, but I agree there is still some chance they will quit the upper mountain while keeping the base, but more likely be forced to bargain or sell out entirely and take the one time $100M++ payout.

[Highway Star]

Powdr does carry significant debt. According to the LinkedIn profile of Jennifer Botter, Powdr's former Chief Financial Officer & Senior Vice President of Finance, she "Recapitalized company with $670M in three separate credit facilities comprised of both debt and equity."

$670M? That's an ASC level of indebtedness. I'm skeptical that it is anywhere near that high, POWDR doesn't behave like a company with the wolf at the door 24/7 as ASC did. I don't think we'd see the current level of re-investment if the debt were that high. However, it's a private company...

Regardless, the question is pretty simple for POWDR: which results in a better net (or minimizes the loss) for PCMR: operating with an effective rent of $17.5M, or shutting down, and paying the PCMR debts out of pocket. Again, my guess is they'll shut down, and blame Vail. That blame will gain traction if POWDR says they will pay $5M rent (the number the judge used). I'm assuming the gag order on negotiations is lifted at this point. At that point Vail has to explain to the community why they won't deal, and that's not where they want to be.

I read it as their entire holdings are worth $670M, part of which is owned by cumming, and part by their creditors.

[hillbangin]

A few observations -

The Cummings crew looks like they are going to make their lawyers rich and play this out to the end - whatever that is - not sure what they are thinking is going to happen unless the appeals judge is a nephew of the old man.

It sounds like the mediation went nowhere? and exactly what were they trying to come to an agreement on?

The bond of 17.5 I'm assuming is not a 100% cash outlay - its a surety bond that some insurance company has to back

The bond is low - land valuation of the upper mountain pretty cheap. Hometown discount for the Cummings.

Cap improvements at K will be on the back burner - but they'll still make tons of snow.

The train wreck continues...........

[hillbangin]

Here's the link in the Park City Record:
http://m.parkrecord.com/park/db_/conten ... d=q0H4eKnR

Bottom Line:
5 million rent x Triple damages
2.5 million attorneys fees.
------------------------------
17.5 million this year

There is no way POWDR will agree to that, however they will delay as long as possible until announcing their decision. So either Vail/POWDR come to a "reasonable" agreement, or PCMR is shuttered for the season.

Obviously, shuttering hurts all parties. I've no idea what PCMR has for debt obligations, but chances are they are better off eating those, than agreeing to that deal. Vail is damaged if there is no deal: obviously they are out the 5 million in rent or so that they would have collected, or whatever they'd have earned from taking over PCMR outright, but it doesn't stop there: Canyons earnings will be way off as well, since Park City isn't the only destination resort in the West, or even in Utah. People will go elsewhere. There are a lot of fixed costs in running a ski resort, if skier visits are off, say, 20% that doesn't mean the profits are off 20%, but way more than that. Marginal revenue and all that. Additionally, they'll have to offer more/better deals to entice visitors to Park City. As a publicly traded company, they will feel the heat.

So what I expect to happen is that Sept 12th, POWDR will announce they are not paying the bond, and then negotiations will resume. Whether anything will come of it, who knows? Both parties should be dope slapped at this point. Unfortunately, the judge can only dope slap POWDR.

The effect on Killington? Depends on the level of indebtedness of PCMR.

It was my understanding that if they don't pay the bond, they lose their right to appeal the eviction decision that has already been made, and there is no new appeals trial date set on September 30th. Meaning they are done with any legal action to stay on the land.



This puts them back at square one. For it to not make sense to pay Vail's $11.25M+ rent, they would have to be able to profit enough from operations on the lower mountain, to the tune of $15M+.

The judge just set the rent at $5M to Talisker for the upper mountain when he set the bond.

That's the issue - PCMR can't make their money without the upper - and the $25 M Vail is paying to Talisker is not worth it without the PCMR gateway.

One last thing is that supposedly there is still a trial about Talisker misleading PWDR on when the lease expired? Seems like that one will be open and shut unless Cummings owns the judge.

[hillbangin]

Powdr does carry significant debt. According to the LinkedIn profile of Jennifer Botter, Powdr's former Chief Financial Officer & Senior Vice President of Finance, she "Recapitalized company with $670M in three separate credit facilities comprised of both debt and equity."

$670M? That's an ASC level of indebtedness. I'm skeptical that it is anywhere near that high, POWDR doesn't behave like a company with the wolf at the door 24/7 as ASC did. I don't think we'd see the current level of re-investment if the debt were that high. However, it's a private company...

Regardless, the question is pretty simple for POWDR: which results in a better net (or minimizes the loss) for PCMR: operating with an effective rent of $17.5M, or shutting down, and paying the PCMR debts out of pocket. Again, my guess is they'll shut down, and blame Vail. That blame will gain traction if POWDR says they will pay $5M rent (the number the judge used). I'm assuming the gag order on negotiations is lifted at this point. At that point Vail has to explain to the community why they won't deal, and that's not where they want to be.

I read it as their entire holdings are worth $670M, part of which is owned by cumming, and part by their creditors.

I think that's right - the bankers valued the whole thing at $670 and they have credit facilities based on that number. They are private so the loans are not disclosed.

[Highway Star]

Here's another spin on it - why doesn't Cumming just cut a deal, or is he holding out to try to leverage the best deal possible? Short of entirely selling out, the only way he's going to make good money on this, with minimal headache, is leasing the business to Vail or selling them a stake of the business.

Vail could lease the PCMR business and lower land from Cumming for a pretty big figure. Say $30M yearly plus inflation and a percentage of profits above a certain level. More than enough to cover existing debts, and a nice tidy profit with no overhead. PCMR combines with the Canyons, skier visits increase 20%, Vail rakes in the cash and Cumming gets a cut.

Or Cumming could sell Vail partial ownership of the PCMR business/land, say 49% or 51%, depends if Vail insists on a controlling interest. Cumming pays off his debts on PCMR or other POWDR resorts, and pockets the rest or plows it into the other resorts. Still has a nice tidy income every year, and Vail has to deal with running the resort.

Or he could sell a minority or a controlling interest in all of POWDR, and Vail becomes the resort operator. Vail greatly expands and diversifies its portfolio, Cumming gets to settle most of his debts, revenues increase across the board, and Cumming would probably increase his yearly income off the whole deal overall, while still owning a ski resort company. This of course would be the best deal for Killington, LOL.