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Rating Action:

Moody's assigns B1 rating to Cedar Fair's proposed $450 million senior unsecured notes

29 May 2014

New York, May 29, 2014 -- Moody's Investors Service (Moody's) assigned a B1 rating to Cedar Fair, L.P.'s (Cedar Fair) proposed $450 million senior unsecured notes due 2024. The Ba3 Corporate Family Rating (CFR) and all other debt ratings are unchanged as is the stable outlook.

Cedar Fair plans to use the proceeds to refinance its existing 9.125% senior unsecured notes due 2018 and pay redemption premiums, accrued interest, and transaction expenses. The proposed offering increases debt by $45 million but is expected to lead to interest expense savings of approximately $10 to $15 million annually. Moody's anticipates that some of the interest expense savings will be distributed to unit holders over time through higher distributions.

The existing B1 rating on the 9.125% senior unsecured note will be withdrawn upon repayment.

A summary of Moody's ratings are as follows:

..Issuer: Cedar Fair, L.P.

....$450 million proposed Senior Unsecured notes due 2024, Assigned a B1, LGD5 - 74%

....Corporate Family Rating, Unchanged at Ba3

....Probability of Default Rating, Unchanged Ba3-PD

....Senior Secured Bank Credit Facility, Unchanged at Ba1 (LGD2-18%) updated from (LGD2-19%)

.$500 million Senior Unsecured notes due 2021, Unchanged at B1, (LGD5-74%) updated from (LGD5-75%)

Outlook, stable

RATINGS RATIONALE

Cedar Fair's Ba3 CFR reflects good operating cash flow, a strong EBITDA margin generated from its portfolio of regional amusement parks, moderate leverage, Master Limited Partnership (MLP) distribution payout, and exposure to discretionary consumer spending. Also included in the rating is the seasonality of the company with the vast majority of business occurring between Memorial Day and Labor Day each year which increases sensitivity to weather conditions or any disruptions to performance. Operations and substantial attendance (23.5 million in 2013) are supported by experienced park management teams and high entry barriers. Sizable re-investment is necessary to maintain a competitive service offering as attendance is exposed to competition from a wide variety of other leisure and entertainment activities as well as cyclical discretionary consumer spending. Debt-to-EBITDA leverage (4.1x as of Q1 2014 incorporating Moody's standard adjustments) is moderate, and has declined from 5.2x in 2009. Moody's projects debt-to-EBITDA leverage to decrease to about 3.7x in 2014 from EBITDA growth. However, distributions to unit holders under the MLP structure (Cedar Fair previously announced it is increasing its annual per unit distribution to $2.80 from $2.50) consume the majority of cash flow and are aggressive. Moody's believes management's target of sustaining debt-to-EBITDA leverage at less than 4x (excluding Moody's standard adjustments) is designed to provide flexibility to support the distribution in a range of economic environments.

Cedar Fair's SGL-2 speculative-grade liquidity rating reflects its good liquidity position over the next 12 months supported by modest projected free cash flow (after distributions) and good covenant headroom. Moody's projects Cedar Fair will generate roughly $30 million of free cash flow over the next year (after interest, $145 million of capital expenditures, and $156 million in distributions). This factors in Cedar Fair's plan for incremental capital spending in 2014 in addition to its normal capital spending level (targeted at a 9% of net revenue range).

Cedar Fair is reliant on its $255 million revolvers (expires February 2018) to cover seasonal cash needs. The cash balance as of Q1 2014 is $9 million and the revolver has $55 million drawn with $16 million of letters of credit outstanding. The maximum amount the revolver was drawn in 2013 was $123 million although Moody's anticipates it will be below that level in 2014 and 2015 given the improved performance of the company. Moody's projects Cedar Fair will maintain about $150 million of unused capacity under its revolvers around the peak in seasonal cash needs in April-May.

The stable rating outlook incorporates Moody's expectation of low to mid single digit revenue growth and mid single digit EBITDA growth as well as our view that Cedar Fair will maintain a good liquidity position and continue to generate meaningful cash flow. We expect material distributions to equity holders to continue to rise based on earnings growth. Despite Moody's expectation for debt to remain constant in 2014, we expect EBITDA growth to lead to debt-to-EBITDA levels at 3.7x by the end of 2014.

The MLP structure and likelihood that management will direct 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. EBITDA less capex-to-interest above 3.0x and CFO less capex-to-debt sustained above 10% would also be required for an upgrade. Performance ahead of plan by itself will not likely warrant positive rating movement given expectations that a majority of excess cash flow after capital expenditures and required debt service would benefit unit holders through increased distributions, rather than creditors.

Weak operating performance, debt funded equity repurchases, distributions or acquisitions that led to leverage above 4.5x would likely put negative pressure on the ratings. CFO less capex-to-debt to a level below 7% or EBITDA less capex to interest below 2.0x could also put downward pressure on the ratings. A deterioration in liquidity due to increasing revolver usage (above seasonal draw downs), failure to maintain sufficient EBITDA cushion under financial covenants, or anticipated difficulty addressing maturities could also result in a downgrade.

Cedar Fair, L.P.'s ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Cedar Fair, L.P.'s core industry and believes Cedar Fair, L.P.'s ratings are comparable to those of other issuers with similar credit risk. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy 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 11 amusement parks, three outdoor water parks, one indoor water park, and five hotels in the U.S. and Canada. Properties include Cedar Point (OH), Kings Island (OH), Knott's Berry Farm (CA), and Canada's Wonderland (Toronto). In June 2006, Cedar Fair acquired Paramount Parks, Inc. (Paramount Parks) from CBS Corporation for a purchase price of $1.24 billion. Cedar Fair's revenue for its fiscal year ended December 2013 was approximately $1.1 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

John C Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns B1 rating to Cedar Fair's proposed $450 million senior unsecured notes
No Related Data.
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