Lenders are becoming increasingly cautious: “For banks, lending to mountain railways is a risky business.”

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Winter sports are still one of the most popular leisure activities for many Swiss. However, many ski areas only make small profits, if at all. Two medium-sized ski areas in Valais, the Belalp Bahnen and the Grächen tourism company, are currently in need of renovation. The mountains of debt are huge. In many cases, banks are forced to give up large portions of their loans.

“For banks, loans to mountain railways are a risky business. Accordingly, the railways have to pay higher interest on their debts,” explains Raiffeisen investment manager Matthias Geissbühler (48) in an interview with Blick. While this business is very capital intensive, margins and returns on capital are generally modest, especially when compared to other industries.

Banks are very careful

The corona epidemic reduced the investment capacity of many railways. “If there are winters with little snow, some railways no longer have much need and suddenly they cannot even pay their debts, let alone make new investments,” says Geissbühler. For this reason, people are equally careful when doing business with ski resorts. For example, Raiffeisenbank Prättigau-Davos does not have any loans for mountain railways in its portfolio.

When asked, UBS does not want to comment on its business with mountain railways. However, according to what we have heard from banking circles, it is said that the big bank does not show much interest in this business area. The situation is different in cantonal banks in tourist areas. “It is our responsibility as the cantonal bank of a tourism canton to support mountain railways with a solid and promising business model,” writes the Cantonal Bank of Graubeğen on the request. Larger ski areas at higher altitudes are likely to meet these criteria.

Particularly difficult for small and medium-sized railways

Berner Kantonalbank (BKB) also provides loans to mountain railways. However, in situations where debt was high, people were already cautious in the past. Raising money for railroads has become more difficult in recent years. BKB lists global warming, increasing energy costs or inflation, Corona and the uncertain situation in the world as reasons. “The risk has increased, especially for small and medium-sized ski areas.” Thanks to careful lending, loan defaults have been prevented in recent years.

If a mountain railroad takes out a loan, it will have to expect immediate interest rates of 4, 5 or 6 percent. Ski lifts that manage to position themselves more broadly will have a clear advantage here, says Raiffeisen’s Geissbühler: “Profitability can be increased if they still operate sales areas, restaurants or ski schools in the destination. Of course, this also increases your creditworthiness and banks are accordingly more likely to can offer good conditions.

Of course, large investors such as Compagnie des Montagnes Suisses AG also provide great help. The investor wants to buy Belalp Bahnen and is also interested in Grächen. Besides the investor’s own funds, the railway also benefits from better credit conditions.

Source :Blick