Posted Tuesday, June 16, 2020 12:13 PM | Contributed by Jeff
In Orange County, Florida, vendors have filed at least 56 liens totaling about $16 million since April. Premier Rides, the ride manufacturer of Ice Breaker, said it hasn’t been paid $2.7 million out of $8.2 million. Rocky Mountain Construction, the builder of Iron Gwazi, filed in Hillsborough County late last month a lien for $3.5 million out of $9 million it said it was owed.
Read more from The Orlando Sentinel.
Between this, the issues with Joel Manby, and the terrible experiences people have had in the last few days as the parks have reopened (especially in contrast with the positive reviews Universal has gotten) the SeaWorld parks are really backing themselves into a corner.
Manby was like the CEO's ago. They've since had a guy from Carnival bail. What does that say about working for this board?
A lot of companies are in cash crunches right now. As they say, cash is king. Revenues are lower than budgeted. Not all expenses are variable. And some variable costs (such as construction projects) become fixed costs once construction commences. So you face paying expenses without revenues needed to cover the expenses. You delay payments and stretch creditors where you can (if you have some flexibility -- or all of them if you don't). None of that is surprising given current environment.
In certain instances (construction being one of them), creditors are given certain protections including filing liens against company assets. Mechanics liens are public record meaning anyone can find them. Most notably the media. Presumably there are other obligations the park isn't paying but no one finds out about them.
So I guess its company shutdown for 2+ months having trouble paying its bills, news at 11.
I think it's perfectly reasonable to question the fitness of the company to do business under any circumstances given its leadership.
I would go out on a limb and say that being so cash poor that a shutdown prevents you from paying contractors for a project that was already underway is problematic.
Not at all, if you have ZERO cash coming in, and no real expectation of when that will start back, you hold on to every darn penny you can. It's rule number one of crisis mgt. You may not like it, you may think ill of all involved, but you absolutely stretch people as far as you can. Cash moves one way, one time. Capex is the absolute first thing you stretch.
All other criticisms of the board are valid, but this is exactly what I would expect to happen.
Also take into consideration that these projects were more than likely green lit three to five years ago. Who could have foreseen the situation we are in now, then?
"Hoard cash" is exactly what the soulless bean counters like Hill Path would say is the number one rule. That's not leadership at all.
The number one rule of crisis management is "take care of your people", which they failed to do when they furloughed almost everyone and left them on the hook for medical coverage during a pandemic. Scott Ross is squatting on a job meant for a leader who understands that the theme park business is built upon taking care of people, starting with the people who bring the brand to life.Last edited by Fun, Tuesday, June 16, 2020 9:18 PM
Didn’t SWE give the higher up executives almost $7M in bonuses not too long ago?
But then again, what do I know?
I can only make an analogy from the seemingly unrelated world of academia.
I do not for a second begin to assume I understand the world of corporate finance, much less from a mega-corporation perspective, but I would say this...
There are some small, (mostly private) institutions that will not survive this crisis. There are also some large institutions (Ohio University, Miami University, Akron University) who have been very poor at managing their finances that are now facing problems other places in much better financial shape are simply not facing.
You can make an easy analogy to a family. Some are in great financial shape, with no debt, great savings, and can weather a storm like this crisis with no issues.
Yes, a lot of companies are in cash crunches right now. Of course they are. But that said, this just further highlights how ****ty this company has been run in the years prior to what is happening now.Last edited by OhioStater, Wednesday, June 17, 2020 1:26 AM
Promoter of fog.
I gotta take the side of the finance guys here. I run the business ops of a small theater company. Our revenue is inconsistent (although somewhat predictable, up until now) but payroll and rent and utilities bills come in every month. So every now and then we scrape bottom and it becomes a question of who we have to pay now, and who will let us slide and for how long. And when I have time to do it right, I can look ahead three to six months and see when those moments are going to happen and plan for them, and I absolutely start hoarding cash several months ahead of time, because I know I'm going to need to make payroll (and I can't put that on a credit card), but other stuff ... eh?
The number of digits gets bigger, and the financial tools become more varied, but I sort of imagine the controller and treasurer at Sea World are doing the same thing. Except that nobody would have predicted this six months ago. When it did hit, pretty much the first thing everybody did was to shore up their credit lines.
(The $7MM in bonuses were paid in stock or options, which are free from a cash perspective. Not saying they were necessary or appropriate, but they didn't impact the ability to pay suppliers.)
So yeah, I'd probably prioritize:
(2) payroll taxes, cuz you'll go to jail if you don't pay them
(3) food suppliers
(5) other merchandise suppliers
(6) maintenance stuff, although I'd defer everything I could get away with
(7) property taxes, cuz they'll lock the doors on you if you get to far out
... and pay as little else as I could get away with, until revenues get back to normal. Frankly, if they aren't doing this at Cedar Fair and Herschend, I'd be asking why.
There was a really good series about this in the NY Times several years ago, written by a guy who runs a cabinet-making business.
I suppose I'm used to the non-profit world where it is typically a big no-no to start paying the day-to-day bills out of the money you've designated for capital projects, even in a financial crisis.
bigboy you are exactly right. The rules for "Fund Accounting" are vastly different than normal GAAP. Hambone got it right up above, you prioritize what you can to save the patient, because if it dies, ain't nobody going to have a job afterwards. As for "Fun", sounds like there may be a personal, and I'm sure very valid, gripe with SEAS. That is sadly irrelevant to how you handle a financial collapse which is what has happened for theme parks, live events, the technical trades that support both, etc.
This was in Orlando Weekly today. I wasn't sure it warranted a news submission since it seems to be a lot of speculation, but it did seem to warrant a share here
Yeah... I thought about it too, and it's largely speculation. I don't think Hill Path, this deep in, wants bankruptcy. The reality though is that they're likely going to be stuck with their investment for years before it turns around.
They could sell the parks separately outside of bankruptcy court. Bankruptcy would allow them to sell assets of the parks free and clear of liens. But that may well result in equityholders receiving nothing. And a plan of reorganization in bankruptcy that does anything to restructure debt likely results in debt becoming the equity and existing equity being wiped out.
The focus on the filing of the liens is strange to me. Though the author of that piece consulted experts consisting of journalists, bloggers and financial analysts who just may not understand. There are a lot of entities that are not paying various obligations. Individuals too. But you don't know about it if no public liens (or other public filings) are made.
If lien holders try to do anything to enforce those liens, SW may then seek bankruptcy protection. Not sure how likely they are to do that though. Or how long that process would take. A large numbers of businesses are not getting paid currently by customers. There are no disputes. Just preserving cash. Do they want to sue their customers? Refuse to do business unless they get paid in full? Need to check your leverage and options before you do that.
Even without lien holders seeking to enforce liens, SeaWorld could file. Long list of companies doing that at this point. Just want to be sure the exit is well thought out.
You must be logged in to post