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Who will start the bidding?

Amid last week's media frenzy about Intrawest and parent company Fortress Investment Group's debt obligations the word "Olympic" was thrown around regularly.

Amid last week's media frenzy about Intrawest and parent company Fortress Investment Group's debt obligations the word "Olympic" was thrown around regularly. The general context was: would the Olympic events - alpine skiing and bobsleigh, luge and skeleton - go ahead on Whistler and Blackcomb, Intrawest's flagship ski resort?

There was little mention of what Intrawest's financial troubles could mean for Mont Tremblant, Steamboat, Sandestin, Lake Las Vegas or any of the other resorts the company owns or operates. No one questioned whether Panorama would continue operating through the winter or suggested that Stratton had been seized by creditors. The Olympic connection to Whistler Blackcomb was the angle that most reporters and headline writers took, at least initially.

When the story broke last Wednesday the Olympics were only three weeks away, so the Olympic connection might have been made anyway. But the New York Post's anonymous source who suggested Fortress co-founder Wesley Edens felt he had a legal right to block the Olympics on Whistler Blackcomb certainly added fuel to the fire. The creditors' decision to schedule the Intrawest auction right in the middle of the Games also helped fan the flames. Which leads to the now obvious question: who benefits from this Olympic connection in what amounts to a Wall Street game of brinkmanship?

The answer is nobody, yet. But emphasizing the Olympic connection may have been an attempt to draw public money into the equation - it's been known to happen on Wall Street - or to underline the value of Intrawest prior to auction.

Assuming there is an auction - a lot can happen between now and Feb. 19, so that is a big assumption - what is being offered for sale? It's not Whistler Blackcomb, or any other resort owned by Intrawest. The lenders' equity interest in Intrawest is what's up for auction. A buyer of that equity interest could control Intrawest, but it might not be as clean and straight forward as it sounds.

The lenders include some of the biggest names to fall in the 2008 financial crisis: Bear Stearns (now owned by JP Morgan) and Lehman Brothers. They are anxious to get their money. The lenders agreed to restructure Fortress's $1.5 billion debt in October 2008 and extended it to October 2009. A further 60-day extension was given while Intrawest attempted to refinance one of its resorts. That attempt failed. Discussions between the lenders and Fortress/Intrawest did not lead to any new restructuring agreement, so the lenders have decided they've had enough.

Assuming, again, that there is an auction on Feb. 19, who would be interested in buying Intrawest? The last two years have left a lot of distressed assets around the world. An institution managing billions of dollars and looking for investments might consider Dubai, real estate developments in India or China where the middle class is growing, a high tech company or perhaps even a car company. There are a lot of things that look more promising than the ski and recreational real estate businesses that have been built around aging North American baby boomers.

But there may be someone who can afford to wait for the recreational real estate and mountain vacation markets to rebound. For a company such as Vail Resorts, which has expertise in both businesses and sees Whistler Blackcomb as its biggest rival, there could be enough synergy to make a bid worthwhile.

Whether Vail Resorts could or would want to hang on to all of Intrawest's resorts is another question. Several years ago Vail Resorts was forced by the Justice Department to sell Arapahoe Basin because it held a monopoly on Colorado's Front Range ski areas.

Breaking up Intrawest and selling off individual resorts may not be as easy as it sounds, either. Some of them - Whistler Blackcomb - make money. Some don't. Some of them come with lots of real estate. Some - Whistler Blackcomb - don't. Whether the real estate is an asset or a liability needs to be evaluated on a resort-by-resort basis. And the buyer(s) need to decide if they are in the resort operation business or the real estate development business, something investors could never really figure out about Intrawest.

But as they say, a lot can happen before the auction date. Intrawest could be pushed into bankruptcy protection, which is not necessarily a bad thing. Vail Associates, the former managing entity of Vail Resorts, went through multiple bankruptcies and ownership changes in the past and always continued to operate. Which is exactly what bankruptcy protection is intended to do: provide stability and maintain operations while ownership and debts are sorted out.

The auction notice also states that the company acting for the lenders "reserves the right prior to the public auction to sell all or any portion of the Membership interests in a private sale, or to adjourn the auction or withdraw any portion of the Membership interests from the public sale." That suggests the lenders are open to offers.

Meanwhile, Nippon Cable is sitting quietly on the sidelines with its 23 per cent stake in Whistler Blackcomb. While people in New York float trial balloons and try to leverage their positions through anonymous sources the key to Whistler's future may lie across the Pacific.