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Rating Action:

Moody's assigns B1 rating to Cedar Fair's proposed $500 million notes

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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