MOODY'S UPGRADES PREMIER PARKS SR. UNSEC. NOTES TO B1 FROM B2 AND DOWNGRADES SIX FLAGS SR. SUB. NOTES TO B3 FROM B2; NEW ISSUES TO FINANCE SIX FLAGS ACQUISITION ALSO RATED
New York, 03-19-98 -- Moody's Investors Service has upgraded Premier Parks Inc.'s (to be renamed Premier Operations Inc.) senior unsecured notes to B1 from B2, and downgraded Six Flags Theme Parks, Inc.'s senior subordinated notes to B3 from B2. Moody's has also assigned the following new ratings: a Ba3 rating to Six Flags Theme Parks, Inc.'s new $472 million senior secured bank facility; a Ba3 rating to Premier Parks Operations Inc.'s new $300 million senior secured facility; a B3 rating to Six Flags Entertainment Corporation's new $170 million senior unsecured notes due 2006; a B3 rating to Premier Parks Inc.'s new $250 million senior unsecured discount notes due 2008; a B3 rating to Premier Parks Inc.'s new $280 million senior unsecured notes due 2008; and a "caa" rating to Premier Parks Inc.'s new $200 million mandatorily convertible preferred stock. The $192 million of zero coupon senior unsecured notes rated Baa3 at Six Flags Entertainment Corporation, which are guaranteed by Time Warner Entertainment, have been confirmed.
The rating action and rating assignments conclude a review that followed Premier's announcement that it will acquire Six Flags for about $1.9 billion from Boston Ventures (51%) and Time Warner Entertainment L.P. (49%). Premier signed an agreement to acquire the equity of Six Flags for $965 million, of which $765 million will be in cash and the remaining $200 million will be in Premier convertible preferred stock. Premier will also assume approximately $460 million in Six Flags public debt and refinance its bank debt. Premier is expected to fund this transaction as well as a previously announced acquisition of Walibi S.A., a European theme park company, and recapitalize the Premier-Six Flags Group with proceeds from the issuance of at least $500 million of common stock, as well as the issuance of up to $200 million in seller preferred stock, in addition to the new public debt, two new bank facilities, and the mandatorily convertible preferred stock, all listed above. The transaction closing is dependent upon the successful consummation of Premier's equity offering. Premier will assume the existing $285 million of senior subordinated discount notes at Six Flags Theme Parks and the $192 million of zero coupon senior unsecured notes rated Baa3 at Six Flags Entertainment Corporation will be defeased with the new $170 million senior unsecured note offering. The existing bank debt at both Premier Parks and Six Flags Theme Parks are expected to be repaid at closing, at which time the Ba3 rating for the Six Flags Theme Parks old bank facility will be withdrawn.
The rating actions and assignments are based upon Premier becoming the second largest theme park company after Disney and the largest regional theme park company overall. Also contributing to the ratings are Premier's increase in scale and geographic diversity, the adoption of the very strong "Six Flags" brand and licensed characters for its existing parks, high barriers to entry and reduced competitive pressure, and potential for cost efficiencies of the larger theme park group. Mitigating these transaction benefits is the loss of the implied support from the higher rated Time Warner Entertainment (Baa3), high post-transaction debt and leverage which Moody's expects will decline over time, the lack of business diversity, and a holding company organization structure with two stand alone operating companies with multiple layers of non-recourse debt.
After the transaction closes, Premier Parks Inc. will be the beneficial owner of the general partner interests in the Six Flags co-venture parks, Six Flags over Texas and Six Flags over Georgia. It will also serve as the holding company with 100% ownership of Premier Parks Operations Inc., the owner of the Premier theme parks, and it will be the 100% owner of Six Flags Entertainment Corporation, an intermediate holding company which owns 100% of Six Flags Theme Parks, Inc., which owns the remainder of the Six Flags theme parks.
Premier Parks Inc., with its headquarters in Oklahoma City, Oklahoma owns and operates 13 regional theme parks in the US.
Six Flags Theme Parks Inc. is a major regional theme park owner and operator with parks located in major metropolitan areas, including New York/Philadelphia, Los Angeles, Chicago/Milwaukee, Dallas/Fort Worth, Houston, Atlanta and St. Louis.
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