Approximately $1.2 billion of debt instruments affected
New York, February 08, 2011 -- Moody's Investors Service assigned a Ba2 rating to SeaWorld Parks &
Entertainment, Inc. 's (SeaWorld Parks) proposed $125
million senior secured term loan A and affirmed the Ba2 ratings on the
existing senior secured revolver and downsized term loan B in conjunction
with a repricing and maturity extension on those facilities. SeaWorld
Parks intends to utilize the proceeds from the term loan A to pay down
the term loan B and fund transaction fees and expenses. SeaWorld
Parks' Ba3 Corporate Family Rating (CFR), Ba3 Probability
of Default Rating (PDR) and stable rating outlook are not affected.
..Issuer: SeaWorld Parks & Entertainment,
....Senior Secured Bank Credit Facility (Term
Loan A), Assigned Ba2, LGD3 - 37%
The proposed refinancing favorably reduces cash interest expense and pushes
out the maturity of the credit facility by approximately a year.
The revised facility consists of a $140 million revolver,
the new $125 million term loan A and a $925 million term
loan B (downsized from $1.05 billion). Moody's
estimates the proposed reduction in the spread on the facility,
the absence of a Libor floor on the revolver and new term loan A,
and proposed reduction in the Libor floor on the term loan B to 1.25%
from 2.25% will reduce cash interest expense by approximately
$14 million annually. Moody's anticipates SeaWorld
Parks will utilize any incremental free cash flow for reinvestment,
to meet required principal payments (annual amortization of 5%
on the term loan A and 1% on the term loan B as well as the excess
cash flow sweep), and to build capacity for cash returns to private
equity sponsor The Blackstone Group (Blackstone).
The approximate 12-month maturity extension of the term loan B
to 6.5 years from closing from its current June 2016 expiration
is modestly favorable, but does not materially alter the refinancing
risk associated with the maturity of all of the company's $1.45
billion of debt in 2016-2017. The revolver and term loan
A will mature 5 years from the closing. Moody's does not
anticipate SeaWorld Parks will generate sufficient free cash flow to fully
fund the maturities, thus creating dependence on access to new capital
to refinance its debt. There are no other material changes to the
prior credit facility terms including the guarantee and collateral package
or the financial maintenance covenants.
SeaWorld Parks' Ba3 CFR reflects the strong brands and consumer appeal
of its portfolio of 10 regional and destination amusement parks,
tempered by exposure to cyclical discretionary consumer spending,
the high debt-to-EBITDA leverage (5.1x LTM 9/30/10
incorporating Moody's standard adjustments) resulting from the 2009 LBO
and recent attendance softness, and risks related to cash distributions
or leveraging actions by equity sponsor Blackstone. The parks generate
meaningful annual attendance (24 million in 2009) and benefit from high
barriers to entry and distinct advantages due to the unmatched animal
encounters, mix of entertainment and rides, and broad demographic
appeal. Amusement parks are capital intensive but we anticipate
SeaWorld Parks will continue its good track record of reinvesting in the
parks to compete for consumers with a wide range of entertainment alternatives,
maintain the attendance base and generate free cash flow. Attendance
at the parks is vulnerable to weather, changes in fuel prices,
public health issues and other disruptions that are outside of the company's
control. A good liquidity position provides a cushion to reinvest
and manage through the recent attendance weakness at the SeaWorld parks
that is in part due to a tragic accident involving a killer whale in February
2010. The high leverage weakly positions the company within the
Ba3 CFR rating category, but Moody's anticipates that attendance
will improve in 2011 as the company continues its significant reinvestment
program and that leverage will return to a mid 4x range or lower.
The stable rating outlook reflects Moody's expectation that SeaWorld
Parks will continue to generate good cash flow and maintain a good liquidity
position to fund continued reinvestment in rides and attractions.
Moody's projects modest debt reduction and the expected improvement
in attendance will reduce debt-to-EBITDA to a mid 4x range
in 2011. Moody's expects the company will refrain from large
debt-financed acquisitions and/or cash distributions to shareholders
until leverage is lower.
Downward rating pressure could result if cash distributions to shareholders,
acquisitions or declines in attendance and earnings driven by competition,
insufficient or ineffective investments or a prolonged economic downturn
result in debt-to-EBITDA sustained in a 5x range.
A significant increase in interest rates, a deterioration in liquidity,
more aggressive financial policies, or if Moody's expects
the company will have difficulty refinancing its 2016-2017 maturities
are also factors that could result in a downgrade.
Upward rating movement is not anticipated due to event risks related to
equity sponsor ownership, but could occur if the company demonstrates
the willingness and ability to sustain debt-to-EBITDA leverage
below 3.5x (after factoring in projected future shareholder distributions),
maintains a good liquidity profile, and generates solid and growing
EBITDA and cash flow with good park reinvestment.
The last rating action was on November 9, 2009 when Moody's assigned
first time ratings (Ba3 Corporate Family Rating and Ba2 senior secured
credit facility rating) to SeaWorld Parks in connection with Blackstone's
$2.4 billion (including fees) acquisition of the company
from Anheuser-Busch InBev
For additional information on SeaWorld Parks' ratings, please
see the credit opinion posted to www.moodys.com.
The principal methodology used in this rating was Loss Given Default for
Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009.
SeaWorld Parks' 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; (iii) 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
SeaWorld Parks' core industry and believes SeaWorld Parks'
ratings are comparable to those of other issuers with similar credit risk.
The principal methodology used in the instrument ratings was Loss Given
Default for Speculative-Grade Non-Financial Companies in
the U.S., Canada and EMEA published in June 2009.
SeaWorld Parks, headquartered in Orlando, Florida, owns
and operates ten amusement parks located in the U.S. Properties
include SeaWorld (Orlando, San Diego and San Antonio), Busch
Gardens (Tampa and Williamsburg) and Sesame Place (Langhorne, PA).
The Blackstone Group (Blackstone) acquired SeaWorld in December 2009 in
a $2.4 billion (including fees) leveraged buyout.
SeaWorld Parks' LTM 9/30/10 revenue was approximately $1.2
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Ba2 rating to SeaWorld Parks' proposed term loan A
250 Greenwich Street
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