Posted Friday, April 3, 2020 9:14 AM | Contributed by Jeff
Without a clear idea of when its parks will be able to reopen, Disney announced plans to furlough non-union workers and stop collecting payments for its annual park passes. During the furlough, employees will receive full health-care benefits, with Disney paying the cost of employee and company premiums.
Read more from CNBC.
This is the benefit of having some diversification, as they can at least afford to pay insurance without the gate revenue. I don't know if SeaWorld is doing this for their folks.
From what I have heard they are not. For me I find out soon if I am considered "essential" but I'm not holding my breath. All of my leadership team has already been furloughed and they are not taking it well. Only a matter of time before my team gets it.
SeaWorld Entertainment is majority owned by private equity. They give no ****s about anything other than the valuation.
Which makes them different than the vast majority of other owners of companies how? As you note, Disney has other operations which makes it easier to pay at least some comp/benefits to park employees while the parks are closed. And going into the shutdown, Disney was in a much better financial position than SeaWorld. Doing what preserves long term value still requires liquidity to do so.
Different how? Really? There is a fundamental top-down difference in company culture between those that are owned by PE (or otherwise looking for an "exit event") and regular public companies. I've lived that more times than I can count. The intent is obviously different when you're positioning a company to sell and when you're trying to build something that is sustainable.
The long time criticism of public companies in general (and one that has been discussed here at various times) is that their management is too focused on the short term (in particular stock price -- the valuation). Not unique to any ownership structure.
You started with the idea that Disney has diversified assets and thus the ability to pay certain benefits without park revenues. Now you appear to be walking back from that for some reason.
A huge number of companies (public, PE, family owned, closely held, startups, etc) are struggling with an increasing number of business related issues right now. What to do with employees, benefits, etc. is one of them. Uncertainty in how long shutdowns will last and what the world looks like coming out of them is compounding those issues. If you don't survive the short run, the long run isn't relevant.
I'm not walking back from anything. Disney in its effort to diversify has intended to build a sustainable business. Because that's their m.o., they find it valuable to pay at least benefits to people not working. With SeaWorld that's not the case. It has been clear for years that the majority investor wants their exit event and that's all.
But even if SeaWorld had the most altruistic of owners, how are they supposed to pay their employees when there's no money coming in and (almost) no money in the bank?
Just make it your m.o. and the money will be there in your bank account. ;)
They have a line of credit that I'm sure they've already drawn down. But they can't even keep a CEO very long. I wouldn't expect them to try and retain anyone else.
At one point, SeaWorld had a springing leverage test in a term loan document. Not sure if its still there. Draws on revolver over a given percentage of the total commitment (often 30-40%) means they have to satisfy a leverage test. Draw increases debt at a time when EBITDA is certainly going to be lower. Analysis a lot of companies (typically only larger companies have springing covenants) are undergoing in addition to liquidity issues.
Millions of businesses are going through liquidity analyses. Trying to determine what to do with employees. Often its not a matter of seeing no value in retaining employees. Its a matter of not having the liquidity to pay them. With uncertainty surrounding how long shutdowns/stay at home orders will last and what the post-pandemic economy looks like particularly in terms of how long it takes for various industries/segments to recover, pressure on liquidity is more of a challenge.
No Kidding Jeff... SEAS just lost another one:
Sounds like a great opportunity for those seeking temporary seasonal employment in the theme park industry.
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