Sugar Bowl announces reorganization
Sugar Bowl officials announced Saturday their decision to file for Chapter 11 bankruptcy protection and reorganize the resort’s financial holdings.The resort’s Controller Doug Milligan said the decision was driven by the management’s recognition of the competitiveness of the ski industry, poor snow years and poor financing. With the reorganization and the infusion of $5.5 million, Milligan said the resort will move closer to its goals of completing the Mt. Judah day lodge and closer to gaining a more competitive edge in the area.”Other areas are maintaining their efforts to invest in their resorts,” Milligan said. “Just look at Northstar’s investment in its area or Intrawest’s investment in Squaw (Valley) or the huge development at Kirkwood. These areas know the only way to remain strong is to upgrade their facilities.”Milligan said Sugar Bowl began construction of the day lodge more than two years ago and, without the reorganization, the construction would have been delayed for three more years.The area was $4.5 million in debt and new investors with new cash will help bring Sugar Bowl’s financial strength back to an even keel, said Milligan.”Our financial restructuring will make Sugar Bowl a stronger and more competitive resort,” said Rob Kautz, Sugar Bowl’s president, in a prepared statement. “We have every intention of remaining as one of the country’s premier independent resorts.”The reorganization will involve three financial heavyweights. They are San Francisco businessman Warren Hellman, GAP founder Don Fisher and Bay area investment banker Bill Hambrecht of Hambrecht & Quist. The three own homes at Sugar Bowl and will invest $3.5 million out of the $5.5 million.Under the terms of the bankruptcy plan, a new board of directors will take over control of the resort. The new six-member board comprised of six homeowners, resort president Rob Kautz and an outside ski area consultant will run what a 13-member board once controlled.The three, who Milligan said have personal stakes in the resort’s success, will own 10 percent of Sugar Bowl’s stock at the end of the deal. Milligan said he is positive, that because the resort is only one small part of the combined wealth of the three powerhouses, there will be no management or service changes at the area.The other $2 million will be supported by the shareholders, who consist of Sugar Bowl property owners. Milligan said more than 90 percent of the property owners supported the reorganization.”The only people who will be negatively affected by the reorganization will be homeowners,” he said. “The ones who supported the decision to reorganize feel it is important enough to keep the ski area going.”This isn’t a great investment, but it means a lot to the homeowners.”Of the 58 homeowners, 45 will continue on as shareholders.”This is their mountain,” said Milligan. “Some homeowners have been here for 30 to 40 years.”He added that the ski area could have made it through the season without the filing, but said this will “help keep them on track.” The company already invested $750,000 and will need an additional $3.5million to complete the lodge.The pre-packaged plan was already in place at the time of the announcement, which means the ski area’s creditors – both secured and unsecured – will be paid quickly. As of Feb. 1, the company will issue new stocks and will delete older stocks that have no investment power. Milligan said the company is eager to convert the $4.5 million debt into new equity.”We are looking forward to this,” he said. “We wanted to do this earlier, but we pushed it back. This was the farthest we could go before we decided to scrap the day lodge idea.”This (change) will be quick and smooth, and we will be looking a lot better after the bankruptcy is completed in February,” he said. “As far as for customers, there won’t be any noticeable difference except in the level of service – it will be going up.”
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