Is Vail group financially secure?

coolair

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After being self employed most of my working life I Have become aware of
indications a Company may be in strife, always concerned when I am an unsecured creditor.
1. Covid shuts down US Resorts.
2.Covid issues at Australian resorts.
3.Dismal start to Australian season.
4. quote " We anticipate you will receive a refund before July 30" July 3rd request.
5. Victorian resorts closed.
6. Will US resorts open next season ?
7. Financial Review report from July !0.

Vail are holding considerable funds from Australian clients, these may have been already been siphoned off and the Australian end be could possibly put into receivership to keep the US side afloat.,
Perisher Blue Pty Ltd are
not the most open about ticket availability or prepared to have decent IT systems & change
of conditions at a whim.

I am total aware that the Covid issue is not their fault, but it has hit most Businesses.
Dud seasons would be factored into their Business plan.
I personally don't want this, just would like a chance to ski, but there are lots of indications I don't like.
 

Chaeron

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After being self employed most of my working life I Have become aware of
indications a Company may be in strife, always concerned when I am an unsecured creditor.
1. Covid shuts down US Resorts.
2.Covid issues at Australian resorts.
3.Dismal start to Australian season.
4. quote " We anticipate you will receive a refund before July 30" July 3rd request.
5. Victorian resorts closed.
6. Will US resorts open next season ?
7. Financial Review report from July !0.

Vail are holding considerable funds from Australian clients, these may have been already been siphoned off and the Australian end be could possibly put into receivership to keep the US side afloat.,
Perisher Blue Pty Ltd are
not the most open about ticket availability or prepared to have decent IT systems & change
of conditions at a whim.

I am total aware that the Covid issue is not their fault, but it has hit most Businesses.
Dud seasons would be factored into their Business plan.
I personally don't want this, just would like a chance to ski, but there are lots of indications I don't like.
https://au.finance.yahoo.com/news/vail-resorts-inc-nyse-mtn-132952047.html

An analysis of Vail’s debt equity ratio (February 2019)

Since then it’s debt has increased and it’s operating revenue would be cratering....

Highly leveraged- in expansionist mode.

Liquidity issues are probably more of an issue....

2020-04-30 Debt: $2.58B Equity $1.63B

A bad NH season would kill the company- more probable than not.

Hedge funds would likely short Vail atm.
 

jonathanc

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telecrag

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Wow, worth about double Rio Tinto shares. What else do they own aside from ageing ski infrastructure? Well, thats the Australian ah, assets.
 

MarzNC

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I have no patience for wading through these sort of financial reports, but for those interested here is the early June info that Vail Resorts provided to investors.

https://www.fool.com/earnings/call-...ts-inc-mtn-q3-2020-earnings-call-transcr.aspx

VR is being very cautious about opening for summer activities at their N. American resorts. Not just because of COVID-19, but clearly some decisions are being made in order to avoid running at a loss for a given location. Seems particularly noticeable for resorts that cater more to locals doing day trips than tourists who tend to spend more while on vacation.
 

rowdyflat

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Highly leveraged- in expansionist mode.
This is the problem.eg Australia mid to late 80 s , Skase , Bond. megalomania .
OK when everything runs smoothly looks good,business model get money up front , low interest rates , develop a virtual monopoly using existing infrastructure might have overpaid for that but a hiccough and whoops.
Bad NH winter for Mc Snow [VR apologies to DPS for poaching the very appropriate name.]
Bad for everyone.
A refund might be difficult.
 
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rowdyflat

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jonathanc

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I have no patience for wading through these sort of financial reports, but for those interested here is the early June info that Vail Resorts provided to investors.

https://www.fool.com/earnings/call-...ts-inc-mtn-q3-2020-earnings-call-transcr.aspx

VR is being very cautious about opening for summer activities at their N. American resorts. Not just because of COVID-19, but clearly some decisions are being made in order to avoid running at a loss for a given location. Seems particularly noticeable for resorts that cater more to locals doing day trips than tourists who tend to spend more while on vacation.
Note that earnings call and the related Q-10 I posted above were both prior to the closure of Falls and Hotham.
 

MarzNC

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Note that earnings call and the related Q-10 I posted above were both prior to the closure of Falls and Hotham.
What percentage of revenue for VR is likely to come from Falls and Hotham in a normal year? While Vail Resorts certainly wanted to get as much operational experience as possible during the Australian season, not sure the closures make that much difference for the overall financial picture.
 

Chaeron

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Oz has been their guinea pig - if they learn from this, they will survive, if not....

wonder how much of their NH revenue is prepaid sales via the Epic pass. If they follow the same approach up North as here they’re screwed - overseas people have alternatives....
 
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MarzNC

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Some of these companies are also highly leveraged and will die.
Being a natural pessimist I cant see things being that much better until later 2021.
Vail Resorts has evolved out of more than one dire time, including the bankruptcy that ultimately led to Rob Katz becoming CEO. The Epic Pass was invented partially to deal with the 2008 recession. I think Katz and his team will manage to hold things together one way or another.
 

Bogong

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I think some people get excited by spreading alarm. Yes, the share price of tourism and travel companies will drop and they will temporarily reduce or stop dividends. That's tragic for people who bought shares in them, but it doesn't hurt consumers. Airlines, cruise lines and even ski lift companies will survive, albeit a very few like Virgin Australia will be under different ownership, but that doesn't really affect consumers like us.
 

Bogong

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Doesnt it ?
Well all the extraneous things like frequent flyer points, gift cards, pre paid tickets, etc carry over with the new owners, so it won't affect us as consumers at all.

However, some superannuation funds may have had about 1 / 10,000th of their money in Virgin Australia shares, so you might be very slightly poorer when you retire, except so many other shares, properties and super fund investments have gone down, that no properly balanced fund will notice the very marginal difference.
 

Chaeron

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What percentage of revenue for VR is likely to come from Falls and Hotham in a normal year? While Vail Resorts certainly wanted to get as much operational experience as possible during the Australian season, not sure the closures make that much difference for the overall financial picture.
Vail own 37 resorts....less than 8% of their portfolio - insignificant in the scheme of things.

The Vail Oz portfolio is partly a revenue smoothing and marketing play, rather than only a portfolio extension.

If I was a Vail shareholder I’d be more worried about the Rona Recession in the USA.
 

zac150

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Vail increased their debt levels by $600m, they also deferred $125m of loss by offering credits for season passes into next financial year, I class this as quasi debt.

the $600m they borrowed would likely get them through to 2022 on skeleton staff and costs, the real kicker would be if they scaled up to open and then had to close again.

the bigger question will be who do they take down with their decisions? Whilst they are financially secure I think they way they have handled this season will destroy the likes of Jindy.
 
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zac150

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Oz has been their guinea pig - if they learn from this, they will survive, if not....

wonder how much of their NH revenue is prepaid sales via the Epic pass. If they follow the same approach up North as here they’re screwed - overseas people have alternatives....

Epic passes represent around a third of total ticket sales, multi day passes and day tickets make up the rest. Accommodation was almost twice the revenue of tickets in the final quarter, but I don’t think this quarter numbers include season passes I.e these are accounted for in q1.

as Vail don’t have the same accommodation ownership here as they do overseas I’m not sure they will have seen the true impact (damage) done, but then again they may see this as an opportunity here.
 
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Chaeron

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Vail increased their debt levels by $600m, they also deferred $125m of loss by offering credits for season passes into next financial year, I class this as quasi debt.

the $600m they borrowed would likely get them through to 2022 on skeleton staff and costs, the real kicker would be if they scaled up to open and then had to close again.

the bigger question will be who do they take down with their decisions? Whilst they are financially secure I think they way they have handled this season will destroy the likes of Jindy.
Interestingly, in their Covid-19 update their leverage discussion focuses on short term debt only.... i.e. liquidity. If their overall debt becomes a problem they will probably sell off some of their portfolio to delever.
 

Chaeron

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Epic passes represent around a third of total ticket sales, multi day passes and day tickets make up the rest. Accommodation was almost twice the revenue of tickets in the final quarter, but I don’t think this quarter numbers include season passes I.e these are accounted for in q1.

as Vail don’t have the same accommodation ownership here as they do overseas I’m not sure they will have seen the true impact (damage) done, but then again they may see this as an opportunity here.
Buying distressed assets at bottom of the market prices - always a good move. Harsh, but a fact of life.
My bigger worry, not just for the snow economy, but more broadly is the amount of zombie companies able to keep going because of cheap debt chewing through resources which arguably should be reallocated to more productive entities. That, and unemployment....
 

zac150

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Interestingly, in their Covid-19 update their leverage discussion focuses on short term debt only.... i.e. liquidity. If their overall debt becomes a problem they will probably sell off some of their portfolio to delever.

what we will never know is the ongoing lending covernants on the loans. One of the things season tickets brings is consistency of income which banks love. I imagine their are some lending covernants around the season passes which is one reason they have been retained.
 
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Chaeron

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what we will never know is the ongoing lending covernants on the loans. One of the things season tickets brings is consistency of income which banks love. I imagine their are some lending covernants around the season passes which is one reason they have been retained.
Spot on. When cashflow or revenue is squeezed those secured creditors will come across for a chat.
 
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zac150

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Buying distressed assets at bottom of the market prices - always a good move. Harsh, but a fact of life.
My bigger worry, not just for the snow economy, but more broadly is the amount of zombie companies able to keep going because of cheap debt chewing through resources which arguably should be reallocated to more productive entities. That, and unemployment....

true buying distressed assets is a good move but if those assets became distressed because of your actions, I feel could be harmful in the long run in a competitive market.

If we are talking Jindy I fear the flow on, there are a few lodges that are carrying a lot of debt that I don’t think will survive. I fear for ski shops that thrive on the non season pass skiers (rentals) will also go.

what impact will these have on the broader Australian ski industry.
 
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Chaeron

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Vail increased their debt levels by $600m, they also deferred $125m of loss by offering credits for season passes into next financial year, I class this as quasi debt.

the $600m they borrowed would likely get them through to 2022 on skeleton staff and costs, the real kicker would be if they scaled up to open and then had to close again.

the bigger question will be who do they take down with their decisions? Whilst they are financially secure I think they way they have handled this season will destroy the likes of Jindy.

https://www.bloomberg.com/news/arti...rus-hot-spot-win-a-reprieve-in-credit-markets

The $600m of new debt was offered under generous conditions (till January 2022) and was significantly oversubscribed, driving down the yield terms.

However, there are some preconditions on the new debt, as @zac150 points out - and we don’t know what preconditions exist pre-roll-over on existing debt covenants.

“A group of lenders led by Bank of America Corp. granted the operator of ski resorts in Vail and Whistler a two-year break on key debt covenants, paving the way for the company to raise $600 million with a new bond offering.”

“The covenant waiver for the company’s existing credit agreement comes with some strings attached, including limitations on dividend payments and investments as well as a minimum liquidity requirement.

During the waiver period, Vail won’t be able to raise any additional debt that is secured by collateral of existing loans other than drawing on its existing revolver commitments.”
 
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Chaeron

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Vail buy lodges, and open a ski hire?
Not at all unforeseen given their accommodation playbook in the USA. Arguably, the ACC or FIRB should oversee, given that it’s Vail’s actions in part (at Falls and Hotham definitely) which could contribute to the forced sale of some lodges.

One doesn’t have to look too far at forced sales in ski resorts and the operator becoming a beneficiary- Baw Baw springs to mind.
 
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telecrag

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The speed of the Victoria response is interesting. I wonder how many casuals? What impact on employees. You would have to look after core needs, and specialist positions. Be good practice with minor (comparative) repercussion for them, for working out strategy for the northern season?
 
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skichanger

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I think they way they have handled this season will destroy the likes of Jindy.
Between the bushfires and the consequences of Covid -19 the area will suffer. But the area is actually more diverse than other rural areas. those who are solely dependent on seasonal income may well be in trouble but that is only a small part if Jindy.
 
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coolair

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what we will never know is the ongoing lending covernants on the loans. One of the things season tickets brings is consistency of income which banks love. I imagine their are some lending covernants around the season passes which is one reason they have been retained.
This is why I started the post.
 

Chaeron

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The speed of the Victoria response is interesting. I wonder how many casuals? What impact on employees. You would have to look after core needs, and specialist positions. Be good practice with minor (comparative) repercussion for them, for working out strategy for the northern season?
Correct. An exercise in fixed vs. variable costs, and the play-off between high margin non-repeat business, and lower margin multi-season clients.

Also the play-off between short term liquidity vs. longer term profitability, market share and solvency.

With climate change fixed costs rise and revenues fall, and the business shifts from being higher margin cash cow. Those PE ratios start dimming, unless you can drive economies of scale in the back end (shared IT, marketing, management systems).
 

zac150

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The sad part is people will continue to call for season pass access only without considering the possible repercussions for the industry in Australia.

don’t get me wrong season pass holders are a valuable part of the business model but they are that only a part.
 
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zac150

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Correct. An exercise in fixed vs. variable costs, and the play-off between high margin non-repeat business, and lower margin multi-season clients.

Also the play-off between short term liquidity vs. longer term profitability, market share and solvency.

With climate change fixed costs rise and revenues fall, and the business shifts from being higher margin cash cow. Those PE ratios start dimming, unless you can drive economies of scale in the back end (shared IT, marketing, management systems).

I would have add to your list the low ratio of extremely high value clients.
 
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Chaeron

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I would have add to your list the low ratio of extremely high value clients.
Agreed, their expansion has essentially made them a bulk provider, and they’ve essentially positioned themselves in the middle market. Never going to be an upscale European provider.
 

zac150

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Agreed, their expansion has essentially made them a bulk provider, and they’ve essentially positioned themselves in the middle market. Never going to be an upscale European provider.

i was actually thinking KT in this comment, they protected high value clients (property owners) over the lower value but consistent season ticket holders.


Between the bushfires and the consequences of Covid -19 the area will suffer. But the area is actually more diverse than other rural areas. those who are solely dependent on seasonal income may well be in trouble but that is only a small part if Jindy.

The ski industry supports about 1/3 of the business that employ people based on the chamber of commerce figures. Sure there is some old money in the area but one thing I know about old money is that it’s old because they don’t part with it.
 

Chaeron

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i was actually thinking KT in this comment, they protected high value clients (property owners) over the lower value but consistent season ticket holders.




The ski industry supports about 1/3 of the business that employ people based on the chamber of commerce figures. Sure there is some old money in the area but one thing I know about old money is that it’s old because they don’t part with it.
What you say makes total sense.

Interesting to compare the Oz resorts in terms of freehold and distribution of accomodation ownership.


On a side note, which Ozzie zillionaire’s turn is it to spend big on a snow resort?
 
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zac150

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What you say makes total sense.

Interesting to compare the Oz resorts in terms of freehold and distribution of accomodation ownership.


On a side note, which Ozzie zillionaire’s turn is it to spend big on a snow resort?

Is any freehold? I assume you mean the ratio of privately owned property?

edit: I should have also said I have no issue with the KT approach as I think they also protected the industry as a whole by providing certainty.
 
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skichanger

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The ski industry supports about 1/3 of the business that employ people based on the chamber of commerce figures. Sure there is some old money in the area but one thing I know about old money is that it’s old because they don’t part with it
You need to look at the detail of that for it to be meaningful. Who is included? Unlikely that people like us are. And what does “ski industry supports” actually mean? All the seasonal businesses such as gear rentals, cleaning, accom, cafes and restaurants? So 1/3rd have reduced income this year, at least half of whom don’t live here or put money back into local businesses. Far less impact than you would expect.
 
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zac150

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You need to look at the detail of that for it to be meaningful. Who is included? Unlikely that people like us are. And what does “ski industry supports” actually mean? All the seasonal businesses such as gear rentals, cleaning, accom, cafes and restaurants? So 1/3rd have reduced income this year, at least half of whom don’t live here or put money back into local businesses. Far less impact than you would expect.

I doubt it, sorry I have looked at the detail.

I also grew up in the region and as an adult have spent time in a banking capacity supporting the region. I have close friends who are still working in the finance industry in the region.

I personally saw the effect that the Smec redundancies had, yes they were some time ago but the region hasn’t changed that much.

Sure the seasonal trade has been spread but I think you underestimate the impact this could have on the region if the spending isn’t there.
 
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D-eye

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the bigger question will be who do they take down with their decisions? Whilst they are financially secure I think they way they have handled this season will destroy the likes of Jindy.

Vail alone wouldn't destroy Jindy, and any decisions or repercussions for area are not in isolation.
If it wasn't for Covid + the bushfires, would this discussion even be taking place?
 

skichanger

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I doubt it, sorry I have looked at the detail.

I also grew up in the region and as an adult have spent time in a banking capacity supporting the region. I have close friends who are still working in the finance industry in the region.

I personally saw the effect that the Smec redundancies had, yes they were some time ago but the region hasn’t changed that much.

Sure the seasonal trade has been spread but I think you underestimate the impact this could have on the region if the spending isn’t there.
Would you care to share some of the detail then rather than just telling me I know nothing?
 
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