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I AGREE
01 Mar 2019
New York, March 01, 2019 -- Moody's Investors Service (Moody's) affirmed Cedar Fair, L.P.'s
(Cedar Fair) Ba3 Corporate Family Rating (CFR), Ba1 senior secured
credit facility, and B1 Senior Unsecured rating. The outlook
remains stable.
The performance of the company continues to be in line with the existing
rating levels with moderate debt leverage levels of 3.7x and EBITDA
margins of 35% as of Q4 2018, despite slightly negative free
cash flow after distributions in 2018 and 2017.
A summary of Moody's actions are as follows:
Affirmations:
..Issuer: Cedar Fair, L.P.
.... Corporate Family Rating, Affirmed
Ba3
.... Probability of Default Rating,
Affirmed Ba3-PD
.... Speculative Grade Liquidity Rating,
Affirmed SGL-2
....Senior Secured Bank Credit Facility,
Affirmed Ba1 (LGD2)
....Senior Unsecured Regular Bond/Debenture,
Affirmed B1 (LGD5)
..Issuer: Canada's Wonderland Company
....Senior Secured Bank Credit Facility,
Affirmed Ba1 (LGD2)
Outlook Actions:
..Issuer: Canada's Wonderland Company
....Outlook, Remains Stable
..Issuer: Cedar Fair, L.P.
....Outlook, Remains Stable
RATINGS RATIONALE
Cedar Fair's Ba3 CFR reflects its portfolio of regional amusement
parks, moderate leverage, and good EBITDA margins.
The parks have substantial attendance (25.9 million in 2018) and
are supported by experienced park management teams with high entry barriers.
Sizable reinvestment is necessary to maintain a competitive service offering
as attendance is exposed to competition from an increasingly wide variety
of other leisure and entertainment activities as well as cyclical discretionary
consumer spending. Results are also highly seasonal and sensitive
to weather conditions. Debt-to-EBITDA leverage of
3.7X as of FY 2018 (including Moody's standard adjustments) is
moderate, and has declined from 5.2x in 2009. However,
distributions to unit holders under the MLP structure (the annual per
unit distribution was increased to $3.70 from $3.56
in Q4 2018) are substantial and led to slightly negative free cash flow
during the last two years. Negative free cash flow after distributions
offset the low leverage level for the current rating and restrain upward
rating pressure.
The stable rating outlook incorporates our expectation of low to mid-single
digit revenue and EBITDA growth if weather conditions are favorable and
that Cedar Fair will maintain a good liquidity position. We also
project that cash flow will be directed to distributions to equity holders
which will continue to rise over time.
Cedar Fair's SGL-2 speculative-grade liquidity rating reflects
its good liquidity position over the next 12 months supported by material
covenant headroom, a $275 million revolver due April 2022
that is undrawn ($15 million of L/C's outstanding) and a
cash balance of $105 million as of Q4 2018 which is down from $166
million at the end of 2017. Free cash flow after distributions
was modestly negative in 2018 & 2017 and we project free cash flow
in 2019 will be approximately neutral (after interest expense of $85
million, $45 million of cash taxes, $170 to
$180 million of capital expenditures, and approximately $209
million in distributions). The EBITDA to interest coverage ratio
is 5.2x as Q4 2018 and expected to improve slightly in 2019.
Cedar Fair is reliant on its $275 million revolver for seasonal
borrowings. The maximum amount drawn on the revolver in 2018 was
$60 million in 2018, down from $110 million in 2017
and $101 million in 2016. We project Cedar Fair will maintain
over $150 million of unused capacity under its revolvers around
the peak in seasonal cash needs in April and May. We expect Cedar
Fair will maintain an EBITDA cushion of more than 30% based on
our revenue/EBITDA growth assumptions. The maximum debt to EBITDA
covenant is 5.5x for the life of the loan. The revolver
is not subject to a clean down provision. We anticipate the company
would reduce its distribution levels or cut growth capex in a dire scenario
which would provide additional liquidity. The $450 million
senior unsecured note due 2024 becomes callable in June 2019 at 102.688.
The MLP structure and likelihood that management will direct excess cash
to unit holders over time constrains the ratings. A debt-to-EBITDA
ratio below 3.5x on a sustained basis could lead to an upgrade
if the board of directors demonstrated a commitment to maintaining leverage
below that level. An EBITDA to interest ratio above 4.5x
would also be required for an upgrade as would a positive free cash flow
to debt ratio after distributions of over 5% with a good liquidity
position.
Weak operating performance, debt funded equity repurchases,
distributions or acquisitions that led to leverage above 4.5x on
an ongoing basis would put negative pressure on the ratings. An
EBITDA to interest ratio below 3x, continued negative free cash
flow that led to a deterioration in its liquidity position, or failure
to maintain a sufficient EBITDA cushion under financial covenants would
also lead to negative rating pressure.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Cedar Fair, L.P. (Cedar Fair), headquartered
in Sandusky, Ohio, is a publicly traded Delaware master limited
partnership (MLP) formed in 1987 that owns and operates eleven amusement
parks, two outdoor water parks, one indoor water park,
and four hotels in the U.S. and Canada. Properties
include Cedar Point (OH), Knott's Berry Farm (CA), Kings Island
(OH), and Canada's Wonderland (Toronto). In June 2006,
Cedar Fair acquired Paramount Parks, Inc. from CBS Corporation
for a purchase price of $1.24 billion. Cedar Fair's
revenue for its fiscal year ended December 2018 was approximately $1.3
billion.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Scott Van den Bosch
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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