Cedar Fair amends credit agreement, pushes refinancing risk out to 2014

In the comments for the 2Q results, I said we don't know what the credit market will look like a few years from now. Well, I guess we don't know today either. I gotta say, I'm surprised.

Count me as surprised as well. Very surprised.

However, the overall tone of this is that the current debt holders are working with FUN, but obviously want them to get other funding. Shorter press release: Our lenders don't want to loan to us any longer than they have to, but they don't want us to default either.

I don't have time to digest this yet, but there are some things to be concerned about.

Among the four bullet points there is a lot of talk of asset SALES.

Sale Lease back transactions are a standard type of financing arrangement, but it's always an eyebrow raiser when a company does it. It's common with Manufacturing facilities, but something as unique as a theme park, is somewhat rare.

The other note about other asset sales of up to $250MM is a concern as well. Not for the health of the company so much, but from an enthusiast standpoint.

LIBOR plus 4 is a good rate

I hope Cedar Fair makes it. All the evidence I've looked at suggests we are only at the begining of this crisis. I was happy about the Paramount purchase a few years ago, but in hindsight I think it was a very bad idea at those prices (and really even much lower prices).

I really think the company needs to transition to lower prices all around. I know that hurts, and maybe it won't work, but people aren't going to come in the coming environment without the trip being affordable (and that definition is dropping every day). The other option is to radically increase prices and hope those that still come will pay, but I don't think there is enough money out there for that strategy to work.

Asset sales of $250M? That seems low to me. How much is Great America worth?

--Dave Althoff, Jr.
(who thinks, "Not much....but it depends on who is doing the buying.")

EVERYONE PANIC! Doomsday is near!*

*according to CCMR.

I've watched doomsday unfold on the TV and internet news sites over and over again, only to pop out of a cake with a huge smile and say, "Just kidding everyone!" It's all about using fear to control the population into acceptance of whatever new policies is on the governments agenda...or something. :p

LostKause,
I know to be cautious of "doomsday" like scenarios (never bought into Y2K, think 2012 is a load of baloney, don't even think aliens are visiting us), but I think you are wrong about the media. Yeah, they’ll certainly feed us a bunch of stories that turn out to be nothing (OK, a real lot). They’ll also ignore very real problems that are close to blowing up though. Have you watched CNBC? If you watch it enough you’d think the market never went down. They are telling you to buy at almost every opportunity. They missed the tech bubble collapse completely. This time we weren’t technically in a recession forever. Things are always under control and about to turn around. Sure earning suck now, but wait for ______. The fact that the major media missed this crisis coming at all is a key to its cluelessness.

This is a credit recession. From the consumers to the government it is caused by too much debt. Our solutions have been to make it easier than ever to hide debt and to spend more ($2 trillion deficit, Cash for Clunkers, very loose standards for banks, etc). We can not get out of the crisis until we deal with it, which means going the opposite directions (which means defaults and paying down debt). If we don’t do that, the bond market will eventually force us too, and you are going to see a major reset of our economy.

After re-reading this several times, a few more issues have come to mind:

1) The interest rate is much lower than previous (LIBOR, assuming a 5 year term) the known interest rates. Banks don't give away money, or leave any on the table. They had to get something for this lower rate. Perhaps there was some prior amount that wasn't secured, that now gets rolled in? (don't think so), or there is potentially a requirement for Equity infusion (shelf offering in the future?). Again, guessing here, unfounded, but something seems amiss here.

2) Authorizes sales in the aggregate GREATER than $250MM, not up to. From the wording of the release, I'm assuming they could go higher. I take this to read that the prior debt documents had provisions against sales higher than that amount, which now means that they COULD sell more. Not a good sign for unique theme park assets, with a current dearth of potential buyers.

3) The fact that the stock did not spike on what appears to be FANTASTIC news, tells me that something else is out there, another shoe to drop.

4) To Dave A's comment, I don't know what GA land is worth, but does that matter since GA is a operated on long term lease from the city/County, and isn't actually owned by FUN. The lease runs through 2039, so the issue is the sale of their "lease right". I'm sure FUN would love to get a nice multiple on it, and Geauga the thing.

Will wait for actual documents to read the minutiae, but again, the lack of major movement on the stock (units), when apparent disaster has been averted, is curious, and should not be discounted.

So everyone in the market has some inside scoop except us?

It's really not in anyones' best interest for CF to fail. It doesn't surprise me that if the bank feels it's well capitalized that they'll give them more favorable terms if it means they're going to get paid.

Jeff said:
So everyone in the market has some inside scoop except us?

It's really not in anyones' best interest for CF to fail. It doesn't surprise me that if the bank feels it's well capitalized that they'll give them more favorable terms if it means they're going to get paid.

which is why the bank is basically telling them to GET THE F OUT, without pushing them over the cliff. That quote about well capitalized is a huge leap. In fact, I would suggest just the opposite, which is why I questioned if the banks didn't extract an equity requirement in return for the extension of time and reduced rates.

Here it is in plain english: The bank suspects they have a basket case on their hands. A liquidation scenario would probably yield infinitely less than the secured debt alone. Thus the bank is trying to "work out" the problem, by extending the terms, and allowing for asset sales greater than $250M, and (read bullet one again) get NEW secured debt to replace the term loans. The term loan holders are trying to wash their hands of this crap.