Without Credit, Mont. Resort Weighs Options

Lee Poole, CEO of Moonlight Basin resort in Montana, is having to rethink his entire business. His banker was Lehman Brothers and he now has lost his access to credit. Poole is looking for investors to take a stake in his company.

MELISSA BLOCK, host:

This is All Things Considered, from NPR News. I'm Melissa Block. What do you do when your bank goes bankrupt? That's an especially tricky question for businesses that rely on loans to cover the cost of their day-to-day operations. NPR's Martin Kaste sent us the story of one such business, a ski resort in Montana that used to bank with Lehman Brothers.

MARTIN KASTE: There really are a few places in the world quite so desolate as a ski resort in the off-season. The bars are all locked up, the condos are dark, there's hardly anybody around. Now imagine the off-season in a ski resort that's only partly built. Lee Poole is climbing into his Cadillac SUV. He's the president and principal owner of a resort called Moonlight Basin.

(Soundbite of talking)

KASTE: The company owns the whole flank of Lone Mountain, a Matterhorn of a peak in Southwestern Montana. In just a few years, Poole has turned this into a skier's paradise. There are dozens of new luxury chalets, and the lodge features stuffed mountain goats climbing up the sides of a giant fireplace. But at the moment, things are on hold here at Moonlight Basin. Poole parks the Cadillac on a construction site that's been dusted with snow.

Mr. LEE POOLE, (CEO, Moonlight Basin): There'll be three bedrooms, three baths, and there'll be a swimming pool, that'll be part of the amenity here, and a party room as well.

KASTE: Those amenities are stuck on the drawing board for now, because Moonlight Basin's financing came from Lehman Brothers. Poole remembers the day last month when he heard the news. He'd been out hunting, and had just come home and turned on Bloomberg.

Mr. POOLE: Think about this. You're bank just disappeared. I mean it's gone. I mean, it was just like, OK, so, let's stay calm here for a minute. You know, what is our next step?

KASTE: Poole and his associates spent the next two weeks working the phones, trying to find someone at what remained of Lehman to release the money. Poole won't say how much it was, but it was money he'd already borrowed. It was just locked up in Lehman accounts. Eventually, they were able to start drawing some of the money again, but not before the company was forced to stop construction, and lay off some employees. If he had the chance, would Poole ever borrow from Wall Street again?

(Soundbite of laughter)

Mr. POOLE: Have you ever heard of the term a trap-shy coyote? We're a trap-shy coyote right now. We're probably going to be doing business with a lot of local banks in Montana, who we know the presidents of the banks, we know the board of directors. We're going to diversify a little bit here.

KASTE: But perhaps more important, Poole says he wants to raise future expansion money from investors. It's a more conservative way of expanding your business, instead of borrowing money, you use your own, or your investors. And this attitude is spreading. University of Washington finance professor, Jonathan Karpoff, says more and more American companies are trying to get away from borrowing.

Professor JONATHAN KARPOFF (University of Washington): Even in the absence of all the other financial troubles, we would probably have seen a lot of firms like the ski resort, choose to have less debt and rely more on equity investments.

KASTE: Less debt makes companies feel safer, Karpoff says. But it also means they grow more slowly. And that has big consequences for everybody.

Professor KARPOFF: A lower growth path for an individual firm or for the whole economy is not necessarily a bad thing. It's the transition from one path to the next that gets really messy and painful. In fact, we have a name for that transition from a higher-growth to a lower-growth stage, it's called a recession.

KASTE: Meanwhile, in the shadow of Lone Mountain, the tiny town of Big Sky is still digesting the news of the layoffs up at Moonlight Basin. Stephanie Hanson waits tables in a nearly empty café.

Ms. STEPHANIE HANSON (Waitress): It left a lot of people hopeless on what they're going to do for the following, like, months to come.

KASTE: She wonders if the failure of some banks back in New York City could even endanger the whole ski season.

Ms. HANSON: It seems like - it's amazing that we're actually feeling the effects from it all the way in this small little town in Montana. So, it's quite scary, I think.

KASTE: Up at Moonlight Basin, Poole says he wants to start hiring people back as soon as he can arrange for new investment partners. And no matter what, he says, there will be a ski season this year, even if he has to flip burgers and wash dishes himself. Martin Kaste, NPR News.

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