Cedar Fair debt-to-capital ratio

Jeff's avatar

Rich_UK submitted this as a news item. Didn't think it was "news," per se, but definitely an interesting factoid:


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Jason Hammond's avatar


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in the abstract a debt to capital ratio of under 1 is not bad.

the real key is the coverage ratio, i.e. EBITDA to debt payment ratio

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To have a debt to capital ratio greater than 1, wouldn't owner equity need to be negative?

I agree that the ratio itself doesn't necessarily say very much beyond how much of the company has been funded with debt versus equity. Some type of coverage ratio (Debt to EBITDA or fixed charges to EBITDA, etc.) is more meaningful.

Could someone explain exactly what this is a measurement of? What is considered "capital" for the purposes of the metric? The company's cash reserves? The market value of their outstanding shares? The market value of the company's tangible property, including or excluding its share values? And if it includes the total value of the company, that would be the market value of all its assets...how is that determined? The last time someone tried to establish a value for Cedar Fair was when it tried to sell itself to Apollo, for what turned out to be about one third of its perceived *share* value, let alone its tangible assets!

I'm sorry, but the metric just doesn't tell me anything.

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I do not believe that GAAP has a definition for debt to capital ratio so you tend to see variations depending on how its defined for the given purpose. I have seen it most often defined as the ratio of total debt to total debt+total equity. There is some wiggle room for what you include in "total debt" and what you include in "total equity." Idea of the raio is that it gives an indication of what percentage of the company is funded with debt rather than equity. Those are typically done using book value numbers for each. Though I have seen some calculations using market values for each (assuming both the company's debt and equity are publicly traded). And I have also seen calculations with book debt numbers and market equity numbers. CF's current market cap is about $1.1 billion so I don't see how you could get to a 96%+ ratio if you were using market equity values.

Looking at CF's 10-Q for 3/11, if you take total long term debt and add to that current maturities of long term debt for your total debt number and the net number for partners' equity for the total equity number, the debt to capital ratio is 96.63% (which is very close to the 96.67% that is in the linked article). Not sure what accounts for the difference.

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