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I AGREE
28 Feb 2013
Approximately $905 million of debt instruments affected
New York, February 28, 2013 -- Moody's Investors Service assigned a B1 rating to Cedar Fair, L.P.'s
(Cedar Fair) proposed $500 million guaranteed senior unsecured
notes due 2021. Cedar Fair plans to utilize the proceeds from the
notes as well as a proposed new credit facility to refinance its existing
$1.13 billion term loan. Moody's also upgraded Cedar
Fair's existing $405 million senior unsecured notes due 2018
to B1 from B2, and affirmed Cedar Fair's Ba3 Corporate Family Rating
(CFR), Ba3-PD Probability of Default Rating (PDR),
SGL-2 speculative-grade liquidity rating and stable rating
outlook.
The proposed refinancing is credit positive as it will extend the overall
maturity profile at a modest increase in cash interest expense (less than
$5 million) that is manageable within the company's projected cash
flow. Cedar Fair plans to fund transaction fees from its existing
cash balance and, therefore, total debt should not change
meaningfully.
Moody's assumes in the B1 rating assignment that Cedar Fair refinances
its existing term loan with the proposed notes and proposed $630
million term loan. If the notes are downsized significantly or
Cedar Fair does not proceed with its plan to issue the notes, Moody's
may adjust the note ratings to B2 from B1 and the proposed credit facility
rating to Ba2 from Ba1. The notes are a joint and several obligation
of Cedar Fair, Canada's Wonderland Company (Wonderland), which
holds the Toronto park, and Magnum Management (Magnum; a non-operating
holding company).
Assignments:
..Issuer: Cedar Fair, L.P.
....Senior Unsecured Regular Bond/Debenture,
Assigned a B1, LGD5 - 75%
Upgrades:
..Issuer: Cedar Fair, L.P.
....Senior Unsecured Regular Bond/Debenture,
Upgraded to B1, LGD5 - 75% from B2, LGD6 -
90%
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
RATINGS RATIONALE
Cedar Fair's Ba3 Corporate Family Rating (CFR) reflects the good operating
cash flow and strong EBITDA margins generated from its portfolio of regional
amusement parks, high leverage and distribution payout, and
exposure to discretionary consumer spending. Operations and substantial
attendance (23.3 million in 2012) are supported by experienced
park management teams, good entertainment value to consumers from
the rides and attractions, 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 FY
2012 incorporating Moody's standard adjustments) is high, but has
declined from 5.2x in 2009. Moody's projects debt-to-EBITDA
leverage in a low 4x range or lower in 2013 and 2014 and this would more
comfortably position the company within the rating category. Distributions
to unit holders under the MLP structure (Cedar Fair previously announced
it is increasing its annual per unit distribution to $2.50
in 2013 from $1.60) consume a majority of cash flow and
are aggressive, but 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
good liquidity over the next 12 months supported by modest projected free
cash flow (after distributions) that is sufficient to meet the required
annual term loan amortization (expected to be $6.3 million
pro forma for the proposed refinancing), and good covenant headroom.
The stable rating outlook incorporates Moody's Macroeconomic Board projection
for 1.5% to 2.5% U.S. real GDP
growth in 2013 and reflects Moody's view that Cedar Fair will maintain
a good liquidity position and continue to generate meaningful cash flow.
Moody's expects modest annual increases in the distribution based on earnings
growth. Debt reduction is expected to be modest, and debt-to-EBITDA
is projected in a low 4x range or lower in 2013 and 2014.
The MLP structure and likelihood that management will direct cash to unit
holders over time constrains the ratings. Material voluntary debt
reduction such that debt-to-EBITDA is sustained below 3.5x,
EBITDA less capex-to-interest is sustained above 3.0x,
and CFO less capex-to-debt is sustained above 10%
could result in 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, acquisitions, or unit holder distributions
or repurchases leading to CFO less capex-to-debt to a level
below 7%, EBITDA less capex to interest below 2.0x,
or debt-to-EBITDA above 4.5x could result in a downgrade.
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.
Please see the ratings tab on Cedar Fair's issuer page on www.Moodys.com
for the last credit rating action and rating history. Please see
Cedar Fair's credit opinion on www.Moodys.com for additional
information on the company's ratings.
Cedar Fair'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's core industry and believes Cedar Fair'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, headquartered in Sandusky, Ohio, is a publicly
traded Delaware master limited partnership (MLP) formed in 1987 that owns
and operates 11 amusement parks, five water parks (four outdoor
and one indoor) and hotels in North America. Properties are located
in the U.S. and Canada and include Cedar Point (OH),
Kings Island (OH), Knott's Berry Farm (CA), and Canada's Wonderland
(Toronto). In June 2006, Cedar Fair, L.P.
completed the acquisition of Paramount Parks, Inc. (Paramount
Parks) from a subsidiary of CBS Corporation for a purchase price of $1.24
billion. Cedar Fair's revenue for its fiscal year ended December
2012 was approximately $1.07 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.
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.
John E. Puchalla
VP - Senior Credit Officer
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 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 $500 million notes
No Related Data.
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