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Rating Action:

Moody's changes Cedar Fair's outlook to stable; assigns B2 sr. note rating; upgrades to SGL-2

Global Credit Research - 20 May 2010

Approximately $1.85 billion of debt affected

New York, May 20, 2010 -- Moody's Investors Service changed Cedar Fair L.P.'s (Cedar Fair) rating outlook to stable from negative, upgraded the speculative-grade liquidity rating to SGL-2 from SGL-3 and assigned a Ba2 rating to its proposed $1.35 billion senior secured bank credit facilities and B2 rating to its proposed $500 million senior unsecured notes. Moody's also affirmed Cedar Fair's Ba3 Corporate Family Rating (CFR) and upgraded the Probability of Default rating to Ba3 from B1. Cedar Fair plans to utilize the net proceeds from the proposed offerings to refinance its $1.7 billion of existing debt. The rating actions reflect Moody's view that the refinancing meaningfully improves the company's liquidity position and provides the company flexibility to reduce debt and manage through a period of attendance-constraining high unemployment notwithstanding the increase in cash interest costs resulting from the refinancing. Cedar Fair's leverage is high and weakly positions the company within the Ba3 CFR, but Moody's expects the company will continue to execute its plan to pay down debt and reduce leverage and this drives the change in the rating outlook to stable.

Assignments:

..Issuer: Cedar Fair, L.P.

....Senior Secured Revolver, Assigned a Ba2, LGD3 - 34%

....Senior Secured Term Loan, Assigned a Ba2, LGD3 - 34%

....Senior Unsecured Regular Bond/Debenture, Assigned a B2, LGD5 - 87% (*)

..Issuer: Canada's Wonderland Company

....Senior Secured Revolver, Assigned a Ba2, LGD3 - 34%

....Senior Secured Term Loan, Assigned a Ba2, LGD3 - 34%

Upgrades:

..Issuer: Cedar Fair, L.P.

....Probability of Default Rating, Upgraded to Ba3 from B1

....Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3

Outlook Actions:

..Issuer: Cedar Fair, L.P.

....Outlook, Changed To Stable From Negative

..Issuer: Canada's Wonderland Company

....Outlook, Changed To Stable From Negative

(*) - Canada's Wonderland Company and Magnum Management Corporation will be co-borrowers of the proposed senior unsecured notes

The refinancing strengthens Cedar Fair's overall liquidity position by pushing out debt maturities and providing additional headroom under financial maintenance covenants. Cash interest expense will initially increase by approximately $20 - $25 million, but Moody's expects a gradual recovery in consumer spending, attendance and earnings along with debt reduction will improve interest coverage. Cash interest costs are also expected to decline upon the expiration in October 2011 of the current under-water interest rate swap contracts.

Moody's anticipates Cedar Fair will utilize cash flow to reduce debt over the next 12-24 months and re-introduce a unit holder distribution by the end of 2010. The restrictions on unit holder distributions in the proposed credit agreement (up to $20 million annually, a one-time $20 million basket in 2011 if secured leverage is less than 3x, and a basket that grows as excess cash flow is generated) are tighter than in the existing agreement, but Moody's expects Cedar Fair will ramp up distributions to a $40-50 million range by 2012.

The credit facilities will consist of a $1.05 billion term loan and a $300 million revolver with a portion of both facilities allocated to Canada's Wonderland Company (Wonderland), which holds the Toronto park. Moody's rates the U.S. and Canadian facilities the same at Ba2 as the instruments will be cross-guaranteed and cross-collateralized by the operating subsidiaries and borrowers in each country. The structure represents a modestly tighter position for lenders to the U.S. borrower than under the existing facility, which is supported only by a stock pledge from Wonderland and a sharing mechanism in default such that proceeds from all collateral is equally shared based upon a lender's aggregate pro rata exposure to all of the U.S. and Canadian tranches. The B2 rating and LGD5 -- 87% assessment on the proposed guaranteed senior unsecured notes reflects their effective subordination to the secured debt. Moody's will withdraw the Ba3 ratings on the existing senior secured credit facility if it is retired in conjunction with the proposed refinancing.

The stable rating outlook reflects Moody's view that the improved liquidity position will provide Cedar Fair additional flexibility to improve credit metrics to levels more supportive of the Ba3 CFR over the next 12-24 months and that de-leveraging will not be meaningfully impeded by the incremental cash interest costs associated with the refinancing.

The upgrade of the speculative-grade liquidity rating to SGL-2 is driven by additional headroom under the financial covenants in the proposed credit facility. The SGL-2 rating reflects good liquidity supported by Moody's expectation that Cedar Fair will generate sufficient cash flow over the next twelve months to fund capital expenditures, $10.5 million annual term loan amortization, and other cash needs. The company is highly reliant on the $300 million revolver for seasonal borrowings, but the size of the facility provides a modest cushion relative to peak seasonal needs and the extension of the facility maturity to 2015 from August 2011 as part of the refinancing provides additional operating flexibility.

The upgrade of the PDR reflects the introduction of senior unsecured notes into the capital structure, which results in a revision in the expected mean family recovery rate to 50% from 65% in accordance with Moody's loss given default methodology.

The last rating action was on April 8, 2010 when Moody's confirmed Cedar Fair's Ba3 CFR following termination of the proposed leveraged buy-out by Apollo Global Management, concluding the review for downgrade initiated on December 17, 2009.

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), King's 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 the LTM ended 3/28/2010 was approximately $917 million.

New York
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Christina Padgett
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's changes Cedar Fair's outlook to stable; assigns B2 sr. note rating; upgrades to SGL-2
No Related Data.
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