Ski resorts groomed for Packer:::Michael West June 5, 2008 - 8:17PM
James Packer's deal to underwrite a rights issue for Octaviar's Living and Leisure Australia business - a satellite of the old MFS - may deliver him control of the largest ski resort portfolio in the country.
He already owns Perisher, the biggest ski resort in NSW. Should his hedge fund Arctic Capital emerge with a sizeable stake in Living and Leisure by picking up a shortfall in the rights issue, Packer could end up controlling two large Victorian ski fields in Mt Hotham and Falls Creek.
The Packer play appears to be a quid pro quo for resolution of the dispute between Octaviar and his Challenger Financial Group.
Challenger is suing Octaviar over $100 million in bonds it was issued by the embattled financial engineer. The claim is that Octaviar is in default because it sold a 65% share of its Stella resorts business to private equity player CVC and breached the terms of the issue in so doing.
The Packer deal could prove academic if Octaviar blows up before due diligence on the rights issue concludes, and the issue is documented next Friday. The Public Trustee of Queensland served a winding up notice on Octaviar Thursday evening although Octaviar has vowed to fight on.
Besides the Challenger claim, Octaviar faces an action from the Trustee which is demanding to be repaid $346 million for another bond issue which matures in 2011. This suit relies on the same alleged breach as Challenger.
For Octaviar's part, it still has some $200 million of cash left in the kitty to do a deal. The problem is that $200 million does not cover the demands of both Challenger and the Trustee.
The Trustee would be loathe to sit back and watch Challenger get preferential treatment on its claim so Octaviar's only hope now, short of winning both legal actions, would appear to be getting both parties to agree to a haircut on their combined $446 million in claims - not to mention keeping some cash in the tin for the rehabilitation of Octaviar.
All in all - and without even going near all the other issues Octaviar faces - this is a tall order indeed.
In Octaviar's favour is the prospect that the Living and Leisure rights issue should take another creditor, National Australia Bank, out of the picture. NAB is owed $50 million by Living and Leisure.
Details of the Arctic proposal remain under wraps. It is not certain how much stock the hedge fund would end up with, although if there were a significant shortfall and it found itself in control of Living and Leisure, James Packer would emerge controlling another two ski fields.
Ironically, he has tried to sell Perisher over the past couple of years.
Packer's casinos business Crown confirmed on Wednesday that it would not be building the world's tallest casino hotel complex on the Las Vegas strip, as revealed by BusinessDay a couple of months ago.
Dismal economic conditions in the US and leverage in the Crown operations have curtailed expansion plans for now.
Given Crown's woes, not to mention a wallowing Challenger share price, Packer will be hoping for another good season at Perisher - and perhaps Falls Creek and Mount Hotham this year - with plenty of snow.
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