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14 Jan 2010
Approximately $1.95 billion of debt instruments affected
New York, January 14, 2010 -- Moody's Investors Service assigned a (P)Ba3 rating to Cedar Fair,
L.P.'s ("Cedar Fair") proposed $1.25
billion senior secured credit facility due 2014 and a (P)B3 rating to
Siddur Merger Sub, LLC's ("MergerSub") proposed
$700 million senior unsecured notes due 2018. Moody's is
also assigning Cedar Fair a (P)B1 CFR and (P)B1 Probability of Default
Rating ("PDR") to provide an indication of the rating levels during the
marketing of the proposed debt instruments. The ratings are prospective
and based on Moody's expectation that Cedar Fair's Corporate
Family Rating ("CFR") will be B1 following the completion
of the $2.4 billion acquisition of the company by Apollo
Global Management ("Apollo") announced on December 16,
2009. Proceeds from the debt offerings along with a contribution
from Apollo will be used to fund the acquisition, refinancing of
existing debt, and related fees. Merger Sub is an acquisition
vehicle that will be merged into Cedar Fair to complete the acquisition
with Cedar Fair continuing as the survivor and note issuer post closing.
..Issuer: Cedar Fair, L.P.
....Corporate Family Rating, Assigned
....Probability of Default Rating, Assigned
....Senior Secured Bank Credit Facility,
Assigned a (P)Ba3, LGD3 - 31%
..Issuer: Siddur Merger Sub, LLC
....Senior Unsecured Regular Bond/Debenture,
Assigned a (P)B3, LGD5 - 85%
..Issuer: Cedar Fair, L.P. (Old)
....Probability of Default Rating, Confirmed
Cedar Fair's existing Ba3 CFR remains on review for possible downgrade.
Moody's expects to conclude the review and lower the CFR to B1 from
Ba3 once the acquisition by Apollo is completed. The downgrade
reflects the modestly higher leverage that will result from the acquisition
and Moody's opinion that exposure to event risk and more aggressive
financial policies will be higher under sponsor ownership. The
proposed financing will favorably push out maturities and reset the financial
maintenance covenants to provide additional cushion. However,
these actions will meaningfully improve Cedar Fair's liquidity profile,
which Moody's expects will support a stable rating outlook at the
B1 CFR level as well as an upgrade of the speculative-grade liquidity
rating to SGL-2 from SGL-3 once the transactions are completed.
Moody's confirmed the B1 Probability of Default Rating ("PDR")
as the rating will remain unchanged following the completion of the acquisition.
Cedar Fair's (P)B1 CFR reflects the good operating cash flow and
strong EBITDA margins generated from the portfolio of regional amusement
parks, supported by an experienced management team, entertainment
value of the rides and attractions, and high entry barriers.
The parks deliver good entertainment value that drives substantial attendance.
These strengths are tempered by exposure to cyclical discretionary consumer
spending, competition with a wide variety of other leisure and entertainment
activities, the high debt-to-EBITDA leverage (5.4x
LTM 9/30/09 pro forma for the transaction and incorporating Moody's
standard adjustments) resulting from the acquisition and risks related
to the future use of cash flow and leveraging actions by the equity sponsor.
The rating also incorporates Cedar Fair's good prospective liquidity
profile supported by Moody's estimate of approximately $80 million
of projected 2010 free cash flow, modest required term loan amortization,
and good anticipated cushion under financial maintenance covenants.
The credit facilities will consist of a $1 billion term loan and
a $250 million revolver and will be secured by substantially all
the assets of the borrower and current and future domestic subsidiaries.
Moody's does not expect the ratings will be affected if Cedar Fair
allocates a portion of the term loan and the revolver to a Canadian borrower
(as is the case with the existing credit facility) because the U.S.
and Canadian credit facilities are expected to be cross-guaranteed
and cross-collateralized by all of the operating entities of the
company. Cedar Fair may establish the new credit facility through
an amendment and restatement of the existing facility. Moody's
would view the existing facility as being effectively retired and,
accordingly, expects to withdraw the Ba3 rating on the existing
facilities if the proposed financing is completed. The B3 rating
on the senior unsecured notes reflects the effective subordination to
the secured credit facility. The notes will have senior unsecured
guarantees from Cedar Fair's domestic operating subsidiaries.
The prospective ratings are based on Moody's expectation that the
existing management team will remain in tact and on a review of the acquisition
financing plan, priority of claim of the proposed instruments,
and summary term sheets for the credit facility and senior unsecured notes
that have important elements -- such as detailed covenants
-- remaining to be negotiated. Apollo's acquisition
is subject to a satisfaction of a number of contingencies including Cedar
Fair obtaining the approval of two-thirds of its unit holders,
the absence of any successful competing acquisition bids, and successful
placement of the proposed debt. The conclusion of the review for
downgrade and assignment of definitive ratings is subject to completion
of the acquisition, a review of the final amounts, terms and
conditions of the debt instruments, and an evaluation of the company's
liquidity position including headroom under financial maintenance covenants.
Moody's last rating on Cedar Fair was on December 17, 2009
when the Ba3 CFR and B1 PDR were placed on review for possible downgrade
following the announcement of the definitive agreement to be acquired
Moody's subscribers can find further details on the company's ratings
in the credit opinion published on www.moodys.com.
Cedar Fair's ratings were assigned by evaluating factors we believe
are relevant to the credit profile of the issuer, such as i) the
business risk and competitive position of the company versus others within
its industry, ii) the capital structure and financial risk of the
company, iii) the projected performance of the company over the
near to intermediate term, and iv) management's track record and
tolerance for risk. These attributes were compared against other
issuers both within and outside of Cedar Fair's core industry and
Cedar Fair's ratings are believed to be comparable to those of other
issuers of similar credit risk.
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, seven water parks (six outdoor
and one indoor) and hotels in North America. Properties are located
in the U.S. and Canada and include Cedar Point (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 LTM 9/27/09 revenue was approximately $930
John E. Puchalla
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Moody's assigns ratings to Cedar Fair's proposed LBO financing
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
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