[Greg]

Here are the entries. Would love to get Eric's take on this.

Burton to Purchase Mad River?
February 20th, 2006 by powderjihad

Granted this is second hand information, but the source has been very reliable in the past. Jake Burton, at a private party, talked openly that he and a special project team are seriously considering announcing a takeover bid for the Mad River Glenn Mad River Glen Ski Area (the Glen is one of the few ski areas in the USA that does not allow snowboarding).

Not sure if he has made a formal offer or if he has just approached some members of the MRG Board of Trustees about the prospect of buying the ski area from it’s shareholders. Given that the Board has a “fiduciary responsibility” to maximize the returns to shareholders, the mountain’s board could be seriously considering his offer or face a shareholder lawsuit for breach of duties. Team members had accumulated shares subsequent to the initial offering and have been attending most of the MRG board meetings. Mad River’s shareholders meeting is on April 1st.

The Glen has projected that the poor winter of this year will result in a loss of over $300k. This loss coupled with increasing insurance and tax expenses will wipe out the ski area’s reserves which had expected to be sufficient to cover a bad winter. In addition, the exorbitant cost of replacing the single lift (recent increases in raw materials, increased energy prices impacting shipping costs, a one-of a kind custom-built lift and delays in the project) has allegedly ballooned to over $2 million.

Currently, Mad River has a financing commitment for less than half of the project costs from Northfield Savings Bank. The mountain has been unable to come up with a concrete plan for the balance and the project has been delayed while the mountain comes up with options. Financing costs for just the NSB portion (45% of the rebuild) are projected to be in the $100k/year range for the next twenty years. Not sure if NSB knows that the reserves will be wiped out this year and what that will mean for their commitment.

The State of Vermont lift department has been pressuring Mad River to replace the 57 year old lift (oldest in the state by far) due to safety concerns. Without a concrete lift replacement plan, and with the mountain voting a delay in the project, the state guys think that Mad River is stalling for time. There is a chance that the lift may not be relicensed for the coming year. Mad River with just the double chairlifts that they have may not be economically viable. With none of the restrictions of current ownership, Burton’s team could install a cheaper double chairlift or any other lift to replace the single chairlift. That would drop the construction costs considerably as used double chairlifts are readily available and could probably be installed this summer, using the current engineering plan.

The Mad River Board has received and is considering a shareholder proposal to create a one-time assessment for the single financing. With a unfunded “hole” of $1.1 million, and no reserves, the mountain has discussed an assessment of $550 per share (for all shares authorized, even the preservation shares). Of course, not all issued shares are outstanding, therefore the per-share-outstanding assessment will be higher.

The board has submitted a proposal to shareholders to increase shares authorized to reduce this per share assessment. Whether the mountain can sell the additional shares is unknown, due to a number of shares which have been tendered for repurchase by disenchanted Glen shareholders.

The mountain was originally purchased for over $2 million. With no reserves and debt still outstanding from the rebuild of the mountain’s double chair, the shareholders equity position has dwindled substantially. Rising costs of the single chairlift rebuild and no concrete financing commitment have forced the board to explore desperate measures. In a October presentation about the situation, the financing committee recommended to the mountain that they pledge all of the assets of the mountain to the NSB in order for them to lend the mountain the money for part of the project. No reserves and a mountain of debt means that another winter like this will force a default under the loan leaving the shareholders with nothing.

In addition, the mountain has ignored one of the fastest growing and weathiest sectors of the winter sports business. The mountain claims that the take off area of the lifts can’t handle snowboards. Jake and his team had a presentation from the lift designers (Doppelmayer/CTEC) and the designers assured them that the single chair return station can be easily redesigned to include a takeoff area that can support snowboard activity. The design of the return station of the double chairlift that was recently installed included snowboard egress as a requirement by Mad River. A replacement double return station with a modern line tensioning system would be cheaper to install than the designed replacement of the antique counterweight system.

So, the Burton team sees Mad River in a precarious financial position and figures that they can recoup their minimal investment quickly once the necessary structural changes are in place. Citizen’s Bank has been very receptive to Jake regarding financing. This would make sense as Citizen’s has recently gained a banking foothold in Vermont and would like to be more visible.

Jake plans on retaining much of the atmosphere of Mad River except, of course, he would allow snowboarding and build a terrain park on the Practice Slope. With his financing commitment, he can move quickly and with a minimal investment have the lift situation figured out by opening day in 2006. The mountain also has a right on adjoining land which could sweeten the deal considerably. Jake has been in touch with Redstone (Burlington property developers) about potential base area expansion and development.

So, who know what will happen between here and the board meeting.

Burton to Purchase Mad River? — Update
April 3rd, 2006 by powderjihad

Saturday was the Annual MRG Board Meeting. In February, we posted a story which had been referred to us stating that Jake Burton and a management team had conducted a review of Mad River’s finances with an eye to potentially acquiring the mountain.

Since there was no mention of this issue from the MRG Annual Meeting, we contacted our source for an explanation. Since February, the mountain closed prematurely due to weather issues. We also understand that there have been issues with members of the senior management team. The mountain re-opened, but the season has never come back and the mountain closed for the season last weekend.

The financial results were worse than had been projected in February. Jake’s team have been frustruated with an inability to establish exactly what the projected loss will be for the 2005-2006 season. Such numbers are, of course, crucial to the valuation that they would place on the mountain. In addition, the mountain has not officially communicated the results of either the shareholder petition (to levy a per-share assessment to cover the single chair shortfall) or the Board proposal (to increase the number of authorized shares).

The Burton team is still interested, but they are unable to get a handle on the financial results. As such, they have been unable to offer a firm proposal to the MRG Board. The team has asked Doppelmayer/CTEC (the lift designers) to establish a “drop dead” date for construction of a replacement lift for the 2006-2007 season.

Burton to Purchase Mad River? — Update 2
April 18th, 2006 by powderjihad

Two weeks ago, the Burton team met with CTEC/Doppelmayer and Mad River Lifts to see if there were replacement or new lifts available to replace the aging single chair at Mad River Glen. According to our source, they have been assured that a commitment needs to be in place by May 15th in order to have a replacement installed by mid-December. (Mad River Glen rarely opens before the Christmas week).

As a contingency, the Team feels that the mountain can open with just the existing double chairs from the base area for any early-season skiing. Should negotiations last later than the deadline, the mountain team can utilize the single chair for the 2006-2007 ski season, replacing it during the summer of 2007.

Burton to Purchase Mad River? — Update 3
May 16th, 2006 by powderjihad

Well, May 15th has come and gone and the the Burton team is apparently so frustruated with Mad River Glen management that they actually considered an outright offer for the outstanding shares.

Passing the May 15th deadline means that they will be unable to install a new lift for the 2006-07 season to replace the aging single chair.

In April, at the Mad River annual meeting (Minutes Available Here), the Treasurer of the mountain reported that the expected loss for the year would be around $200 thousand. In addition, they plan to spend $130K on capital spending (chiefly the burial of power lines) and they have an initial installment deposit due on the rebuild of the single of $100K. The Mad River Reserve fund for capital expenses was around $425K at the beginning of the season. The planned spending will severely decrease their resources.

In addition, final payment of the Double Chairlift debt is due soon.

The Burton strategy is to hold back and see what the Mad River plan develops, especially with regard to the single chairlift financing. The cost estimate on the rebuild is significantly higher and the amount of financing extended to them is fixed. They have a larger “hole” to fill and they are counting on charity donations as key in their business plan. Their fundraiser has gone back to them with a feasability report that has not been made public. They have not hired her to run the final campaign.

If they are unable to raise the money, it is highly unlikely that the State Tramway department will allow them to run the single chair for the 2007-2008 season due to the age of that lift (installed in 1948).