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EB-5 delay forces Mount Snow parent company stock deal

Peak Resorts says a proposed $20 million stock sale will provide much-needed financial flexibility

DOVER—Mount Snow’s parent company is proposing a $20 million stock sale to help relieve the pressure of continued delays in the Dover resort’s EB-5 foreign investment program.

Missouri-based Peak Resorts last week announced the financial maneuver, which is subject to shareholder approval in October.

Administrators said they need more working capital due to cash constraints, and they cited two factors behind the decision: An unseasonably warm winter in 2015-16 cut deep into the ski company’s revenues, and the delayed release of Mount Snow EB-5 funds has slowed upgrades at that resort.

In light of those difficulties, the stock sale “will significantly strengthen our balance sheet, today and into the future,” said Tim Boyd, Peak Resorts president and chief executive officer.

Peak operates 14 ski resorts, but Mount Snow has been getting a lot of attention in the company’s recent earnings reports. That’s because the resort raised $52 million via the federal government’s EB-5 program to finance a major snowmaking upgrade and a new ski lodge, but the money remains locked in an escrow account while administrators await approvals from U.S. Citizenship and Immigration Services.

Delay brings headaches

The EB-5 program allows foreign investors to gain visas by investing in job-creating projects in the U.S. But Citizenship and Immigration Services has acknowledged a big backlog in approving visa petitions related to the program.

Mount Snow appears to be caught in that backlog. Though the federal agency has approved the resort’s EB-5 program as a whole, the government hasn’t completed a key visa review that would allow for release of the $52 million.

The delay has spurred a lawsuit filed by one Mount Snow investor. Federal officials wouldn’t comment on that litigation and have said they won’t comment on the status of specific EB-5 projects.

The delays are causing problems for Peak, since the company has sunk about $12 million into the Mount Snow projects and can’t move forward without the EB-5 funding. Administrators reported in July that the EB-5-financed West Lake snowmaking upgrade — which will give Mount Snow six times its current water storage capacity — won’t be ready for the 2016-17 ski season.

During that same quarterly earnings report, Peak said it wouldn’t issue a dividend and had secured access to $10 million in short-term financing. The EB-5 holdup was cited as the driving force behind those decisions.

On Aug. 22, Peak announced an agreement to sell $20 million in stock to CAP 1 LLC, an Oklahoma-based company that is managed by New York-based Summer Road LLC.

Summer Road is an investment firm for the Sackler family, which is known for running pharmaceutical giant Purdue Pharma.

The deal involves preferred stock, which entitles its holder to greater financial benefits than common stock. Summer Road also has obtained the right to nominate someone to serve on Peak’s board of directors.

Additional investment

In announcing the deal, Boyd said Summer Road is a “long-time shareholder” that “has decided to make this additional, significant investment in our company.”

Boyd — who in July predicted a “significant rebound” for his company in spite of last winter’s tepid weather and the Mount Snow EB-5 troubles — said news of the pending stock transaction is “a strong validation of the quality of our assets and the opportunity in front of us.”

In a prepared statement accompanying the stock announcement, a Summer Road executive said the deal “shows our support for Peak Resorts’ current and future growth projects.”

Although Mount Snow’s growth has been slowed by the EB-5 snafu, resort spokesman Jamie Storrs said crews have been working to upgrade the property in other ways.

“We have been using the time to focus on other projects around the resort that normally would take a backseat in a summer when we’d have a major project,” Storrs said. “It’s actually been really nice to get some of the things done that we have, and it should lead to a better ski season.”

Storrs outlined recent work at Mount Snow including:

• Crews are installing a new lift at Grommet Park, which is geared toward younger and inexperienced skiers. The lift should increase uphill capacity by 50 percent at the park, Storrs said.

• Storrs said there’s been 1,680 hours of labor devoted to winter trail improvements. That includes “trimming and cutting new access points and new ski lines through some of our glades areas, and cleaning up downed branches and brush,” he said.

• Though West Lake won’t be ready, snowmaking improvements are happening. Mount Snow is “overhauling” a valve house atop the resort’s Bear Trap Lift and has replaced 7,000 feet of pipeline, Storrs said. An additional 13,000 feet of pipe are expected to be updated before the ski season.

“While we were hoping to be working on our West Lake project, that doesn’t mean the snowmaking team has been sitting on their haunches all summer,” Storrs said.

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Originally published in The Commons issue #372 (Wednesday, August 31, 2016). This story appeared on page C1.

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