Colorado town's bond-financed ski resort purchase stalls

Bloomberg News

Higher interest rates and demands from prospective bond investors have set back a plan by Nederland, Colorado, to issue up to $225 million of revenue bonds to buy a ski resort, town officials said on Wednesday. 

Although a purchase agreement for the Eldora Mountain Resort expired, the town of nearly 1,500 in the mountains southwest of Boulder is still actively pursuing a deal with current owner POWDR and will seek funding from the state and other sources for capital improvements at the resort, a statement from Nederland's mayor and board of trustees said.

"We have examined (the resort's) operations, its finances, its infrastructure, its risks, and its opportunities," the statement said. "Our financial modeling shows the mountain has the ability to service its required debt, fund ongoing maintenance, maintain reserves, and create capacity for future investment — in the resort and the town." 

In January, the town board authorized selling tax-exempt Mountain Recreation Enterprise bonds backed solely by revenue generated by the resort through RBC Capital Markets and BofA Securities to finance the resort's acquisition and improvements. The planned deal, which had a net effective interest rate capped at 9%, was aimed at institutional investors, potentially in a private placement.  

Interest rate modeling for the bonds rose from about 7.5% to almost 8.5%, while prospective bondholders sought stronger security tied to the asset, reduced leverage and debt in the transaction, and a more aggressive model incorporating poor snow years, according to the statement.

In response, a sale-leaseback structure tied to the resort was developed and a fundraising effort was launched for $20 million to jump-start capital improvements, including an upgraded ski lift and construction of a mountain lodge, with the town initially seeking money from the state government.

"By separating these projects from the order of payments regulated by the bonds, we give Eldora considerably more flexibility," the statement said. "In a poor snow year, the mountain can prioritize its debt obligations, essential maintenance, and reserves."

Town officials warned if the financing proceeds and updated agreements are reached with POWDR, risks related to weather, interest rates, and operations will exist for what they called a first of its type of municipal acquisition. 

Nederland began its quest to purchase Eldora after POWDR announced in August 2024 it was selling the resort along with other properties in the U.S. and Canada. Under the acquisition plan, the resort's approximately 700 workers would become town employees. 

Revenue from lift tickets, food, rentals, and other purchases would be deposited in the town's Mountain Recreation Enterprise Fund and used as the sole payment source for the bonds. 

With 680 skiable acres, Eldora is one of Colorado's smaller ski areas, but at 21 miles from Boulder it is one of the easiest to reach from a major population center.