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I AGREE
27 Mar 2017
New York, March 27, 2017 -- Moody's Investors Service (Moody's) assigned a Ba1 rating to Cedar Fair,
L.P.'s (Cedar Fair) proposed 1st lien credit facility (consisting
of a $275 million revolver and $650 million term loan B).
The revolver will have $275 million in US$ capacity with
$15 million of the total issued by subsidiary, Canada's
Wonderland Company. 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 1st lien term loan
and pay transaction related expenses as well as general corporate purposes.
We anticipate the company will issue additional unsecured debt in the
near term. The proposed offering increases debt by $47 million
but extends the maturity date of its revolver to 2022 and the term loan
B to 2024. The ratings on the existing credit facility will be
withdrawn after repayment.
A summary of Moody's actions are as follows:
..Issuer: Cedar Fair, L.P.
....$260 million revolver due 2022,
assigned a Ba1 (LGD2)
.$650 million term loan B due 2024, assigned
a Ba1 (LGD2)
....Corporate Family Rating, Unchanged
at Ba3
Outlook, Unchanged at stable
..Issuer: Canada's Wonderland Company
$15 million revolver due 2022, assigned a Ba1 (LGD2)
RATINGS RATIONALE
Cedar Fair's Ba3 CFR reflects good operating cash flow, strong EBITDA
margins generated from its portfolio of regional amusement parks,
moderate leverage, MLP distribution payout, and exposure to
discretionary consumer spending. Operations and substantial attendance
(25.1 million in 2016) 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.
Results are also highly seasonal and sensitive to weather conditions.
Debt-to- EBITDA leverage (3.5x pro-forma FY
2016 incorporating 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 $3.42 from $3.30 in Q4 2016)
consume a sizable amount of cash flow and leads to minimal free cash flow.
Limited free cash flow after distributions offset the low leverage level
for the current rating and restrain upward rating pressure.
Cedar Fair's SGL-2 speculative-grade liquidity rating reflects
its good liquidity position over the next 12 months supported by material
covenant headroom, revolver availability, a large cash balance,
and no near term debt maturities pro-forma for the transaction.
We project free cash flow in 2017 will be minimal (after interest expense,
approximately $55 to 65 million of taxes, about $170
million of capital expenditures, and $190 million in distributions).
This factors in Cedar Fair's plan for slightly higher capital spending
in 2017, the increase in the distribution rate in Q4 2016,
and higher tax expense. The EBITDA to interest coverage ratio pro-forma
for the transaction is 5.3x as Q4 2016.
Cedar Fair is reliant on its $275 million revolver for seasonal
borrowings. The maximum amount the prior revolver was drawn in
2016 was $101 million which was up from $85 million in 2015
and 2014. 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 new revolver will not be subject
to a clean down provision. We anticipate the company would reduce
its distribution levels or cut growth capex in a dire scenario that would
provide additional liquidity.
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
anticipate material distributions to equity holders which will continue
to rise over time.
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. 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%. 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 on
an ongoing basis would likely put negative pressure on the ratings.
An EBITDA to interest ratio below 2.5x or a deterioration in liquidity
due to increasing revolver usage (above seasonal draw downs), or
failure to maintain sufficient EBITDA cushion under financial covenants
would also lead to negative rating pressure.
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 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. from CBS Corporation
for a purchase price of $1.24 billion. Cedar Fair's
revenue for its fiscal year ended December 2016 was approximately $1.3
billion.
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.
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: 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
No Related Data.
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