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Loan problems put Great Wolf's ownership of two properties at risk

Problems with a $67 million loan threaten Great Wolf Resorts Inc.'s ownership of its properties in Traverse City, Mich., and Kansas City, Kan., the Madison company disclosed Wednesday.

Problems with a $67 million loan threaten Great Wolf Resorts Inc.'s ownership of its properties in Traverse City, Mich., and Kansas City, Kan., the Madison company disclosed Wednesday.

While Great Wolf is not in default, the loan servicer has put special arrangements in place because the two properties now fail to meet the terms of the loan agreement, Great Wolf said as it announced its third-quarter financial results. The properties -- two of several Great Wolf indoor water park resorts across the country -- secure the debt.

Because of the national economic slowdown and "severe regional economic declines," Great Wolf believes the two resorts together are now worth "significantly less" than the loan principal amount.

The company said it is working to modify the loan terms. But if it cannot, Great Wolf said it may surrender the properties to the lender or a receiver.

In an interview, CEO Kim Schaefer said that is only one option.

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"It's not the imminent option," she said. "It's not the only option. ... It's not the option that we want."

The company is making its payments, and the loan was transferred to a special servicer at Great Wolf's request because that was necessary to conduct negotiations on possible modifications, Schaefer said.

Disclosure of the loan issues came as Great Wolf reported narrower losses on higher third-quarter revenue.

The operator of indoor water park resorts said sales rose 5.6%, to $81.1 million, as consumer demand picked up and average daily room rates climbed 2.2%.

Great Wolf has been outperforming the overall U.S. hotel industry, Chief Financial Officer Jim Calder told analysts during a conference call.

The loss of $993,000, or 3 cents a share, compares with a loss of $36.9 million, or $1.18, a year earlier. Last year's results included a write-down of $24 million on the company's Blue Harbor Resort & Conference Center in Sheboygan.

After earnings were released, Great Wolf shares closed 6 cents higher at $2.37.

Copyright (c) 2010, Milwaukee Journal Sentinel

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