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Cedar Fair Corporate Development Discussion Thread (FUN)

P. 70: Cedar Fair unveils 2022 operating season plans

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I think there is a lot of misinformation being spread in this thread especially when comparing the Six Flags debt to Cedar Fair.

 

I could be wrong but this is how I understand it. I hope I'm not spreading more misinformation.

 

Yes, both entities were highly in debt and for the same reasons (over expansion). However, Cedar Fair has been paying down their debt every year while turning a profit (not sure what the final figures for 2009 will be). As a limited partnership Cedar Fair was obligated to return profits to shareholders (unit holders) in the form of a dividend. That dividend was not issued in 4th Quarter as CF needed that money to meet loan obligations and stay on a schedule of pating down some of the principal on their loan.

 

The difference is with Six Flags the total debt load never went down, the lenders were getting fat off SF interest payments for years. When SF sold porperties they didn't do it to pay down debt, but to make interest payments. Not apply it to the principal.

 

In consumer terms, if you charge $1,000 Visa is happy when you make only the minimum $10 (1%) payment. If your an annual interest rate is 15% the next month your $1,000 bill (minus your $10 payment) will be $1,002.50.

 

Another example (which has an interest rate closer in line to what SF might have on their loan) is if you have an $80,000 mortgage (which is a loan) 5% interest for 15 years. Over the course of those 15 years you pay back $115,000 to the bank, which is not 5% over what you borrowed but 44% more than you borrowed.

 

The net result is that interest compounds over time and if SF not having trouble paying back the minimum their debt load is not reduced but Cedar

Fair puts more of their revenue towards the principal to bring down their debt.

 

*These calculations are just examples, don't any of you financial types get upset about accuracy, but let me know if I'm making any fundamental misjudgements.

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^ I can certainly agree with the loan factor between Six and CF. For the past couple of years Cedar Fair's stock was always rated higher by analysts than Six Flags for the fact CF did have a high debt load but was able to make the payments and pay dividends far better than Six Flags. I think with the Apollo buyout as others have said the debt CF has will be knocked out alot faster now.

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I'm not entirely sure what some of the fans of the former Paramount Parks are complaining about with CF. In 3 years, CF has completely rejuvenated those parks. Three got B&M hypers, and another got one of the best floorless coasters in the world and an Intamin giga. So what's the beef? Before CF, KD, KI, and CW had ZERO B&M's and ONE Intamin. Those were Paramount's three flagship parks and they had one combined coaster from the two premier coaster designers of the last 15 years.

They had to destroy a park to get the floor-less

 

I think the unbelievable thing is the amount of turnover the past couple of years have brought in the industry.

 

Six Flags sells off numerous properties to Parc Management.

Busch Entertainment goes to Blackstone.

Cedar Fair to Apollo.

 

There are always opportunities out there, and though recessions generally hurt everyone, they do bring about a lot of change and hope.

I saw this as a positve when six flags sold to Parc, my homepark got it's first coaster in 8 years and it's been better overall with more deals and a cleaner park. They did take out my favorite water slide though Down hill lazy river RIP

^ Especially when you consider that Cedar Fair bought Six Flags World of Adventure for $145 million...

 

...Just to close it down.

They really milked it for the rides and wanted a waterpark only attraction, but then that back-fired with a crap season

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So...What now? Are the selling any of the parks or are the parks getting better?

 

They are going to auction off every park, but instead of dollars, they will be using Double Stuff Oreos as currency, and use the Oreo money to find a way to make multiple clones of Dabney Coleman, so they can have a Mars exploration rocket filled with Dabney Coleman's.

 

Seriously, this news is less than a day old. No one knows.

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So...What now? Are the selling any of the parks or are the parks getting better?

 

you really can't know the day after they announce it! There will be talk of future plans, then things will fall through, and they'll change it, or things will go perfectly and all goes well (for them). We'll just have to wait and see what they have planned for the parks.

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I found this link this morning.

 

http://mobile.plaind.com/story.php?id=8348675

 

 

The pending sale of Cedar Fair Entertainment Co. to a New York private-equity firm will bring financial stability to the company but have little impact on how the amusement park operator is run, Chief Executive Dick Kinzel said Thursday.

 

“For our employees and our customers, nothing is going to change,” Kinzel said.

 

The company’s headquarters will remain in Sandusky, staffing levels will stay the same, and Kinzel and his management team will continue at the helm, he said.

 

What will change is Cedar Fair’s obligation to pay off or refinance $1.7 billion in long-term debt.

 

Private-equity firm Apollo Management plans to buy Cedar Fair’s assets for $635 million, as well as pay off the debt, making the deal worth $2.4 billion. The transaction is expected to close in the first half of 2010.

 

Cedar Fair has struggled with its debt load since purchasing five Paramount theme parks for $1.24 billion from CBS Corp. in 2006.

 

The move transformed Cedar Fair from a regional player into the third-largest theme park owner, behind only Six Flags and Disney. But it also created a financial burden on the company, which feared it would be charged high interest rates if forced to refinance its debt in 2010, when much of it was to come due.

 

 

“We would have never gone into the acquisition if we didn’t think we could control the debt,” Kinzel said.

 

“The economy was different then, and there were reasons we wanted those parks,” Kinzel said.

 

Three of the Paramount parks were in warm-weather locations, which would allow Cedar Fair to bring in revenue all year round, he said.

 

But economic conditions over the past year put Cedar Fair in a bad position to ask banks for money. The company said it had 1.2 million fewer visitors at its 11 amusement parks and seven water parks across North America through September of this year. Those parks include Cedar Point in Sandusky, Kings Island near Cincinnati and Geauga Lake’s Wildwater Kingdom in Aurora. Revenue also slipped 7.6 percent to $810.5 million.

 

The company had taken several steps to reduce its debt over the past year, including cutting the dividend it had paid out to investors since 1987. But when Apollo approached the company with an acquisition offer in October, Cedar Fair’s board of directors seized the opportunity.

 

The Cedar Fair deal comes just two months after Anheuser-Busch InBev announced it would sell its 10 theme parks across the United States, including the three SeaWorlds and two Busch Gardens, to private-equity firm Blackstone Group for at least $2.3 billion. It also comes after Six Flags, the world’s largest theme park operator, filed for bankruptcy in June.

 

“We think [the sale] is in the best interest of our unit holders,” Kinzel said. Under the terms of the agreement, shareholders will receive $11.50 for each limited partnership unit they own. That’s 27 percent more than the $9.08 closing price Wednesday. On Thursday, the price increased 23 percent to close at $11.20.

 

Some equity analysts, such as Jeffrey Thomison of Hilliard Lyons and James Hardiman of FTN Capital Markets, thought the sale price seemed low.

 

“I was a little surprised by this,” Hardiman said. “I thought the worst was probably behind Cedar Fair.”

 

He said he thinks Apollo Management got a great deal on the company, whose units were trading at historically low prices. He said Cedar Fair is well run and he expects it to be able to rebound well once economic conditions improve.

 

The unit price started to plunge in March, when Cedar Fair announced it was reducing the dividend that it later cut. Units had been trading for around $20 for most of 2008.

 

Kinzel said it’s not a great time to sell anything, including an amusement park chain, but “sometimes, circumstances dictate.”

 

To reach this Plain Dealer reporter: ssamavat@plaind.com, 216-999-4331

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I can say with the article I posted, this is exactly the print you see right up to, during, and shortly after a buyout. This is to mainly calm fears amung the public and employees.

 

I along with others have already said that there very well may be changes in the future but it wont be today or tomorrow.

 

What I've observed with other buyouts is the management team from the company that has been aquired usually stay on for a few years after the merger and then go on thier own way and/or retire.

 

The main issue at hand is the GP thus the print you see basically "nothing will change no one will loose thier jobs, business as usual."

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I know they always say this stuff when a chain of anything is sold to calm people down but im still worried about the smaller parks and less popular parks especially my home park, Worlds of Fun( its not much but its better than nothing)

 

Yeah, this is my primary concern. I know WoF doesn't do a ton of business, and this season seemed to be particularly bad, despite opening Prowler, one of the best coasters I've ever ridden on.

 

I just hope we don't lose her. I've been visiting for more than 25 years. The Zambizi Zinger was my first "real" coaster (if you don't count a crazy mouse at the state fair, which I don't), the Timberwolf was my first woodie, and the Orient Express turned my world upside down for the first time. I end up going at least once every year, and my wife and I had season passes this last season. It's bad enough that she's lost her luster and sparkle... I'll really miss her if she closes her gates.

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I know they always say this stuff when a chain of anything is sold to calm people down but im still worried about the smaller parks and less popular parks especially my home park, Worlds of Fun( its not much but its better than nothing)

 

Nothing has changed though. Poorly performing parks were at risk of being closed before the buy out as well. See: Geauga Lake.

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^I seem to remember Geauga Lake was doing well until it was sold to Cedar Fair, so that closure was more lie "forced poor performance." If you remove a major draw and don't add anything to the other major draw, of course a park will do poorly.

 

 

Also, while World's of Fun and Michigan's Adventure don't draw crowds like the other major parks in the chain, aren't they still in good shape financial wise? Obviously if a park is losing money it doesn't make much sense to keep, but if it is, why would you sell it, even if it doesn't pull in the number of people as the major parks. For it's size, Michigan's Adventure pulls in a lot of people, and it seemed like a park many operators would love to have. I'm not saying parks won't be sold, but I don't think any are now. The news about World's of Fun and Valleyfair being sold made sense when Cedar Fair was its own company looking to reduce its debt, but that problem seems like it is solved now.

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Seems to me Worlds of Fun and Michigan's Adventure are few of the Cedar Fair parks that have growing numbers and increasing revenues. If I remember correctly, the list was: Dorney, Kings Island, Wonderland, Michigan's Adventure, and Knott's. I don't know this for sure, of course, but I remember a press release by Cedar Fair citing them as the parks with great increases in numbers recently.

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http://www.sanduskyregister.com/articles/2009/12/18/front/doc4b2a7e49a8ba5362096786.txt

 

He’s still the boss, and Sandusky will remain the headquarters for Cedar Fair’s amusement and water parks, Cedar Fair CEO Dick Kinzel said.

 

While Cedar Fair’s ownership is about to change, many factors will stay the same. Kinzel said he is contracted to stay on as CEO and will have an option to extend his contract if he and the new owners of the company reach an agreement for an extension.

 

“If I had to guess, it would probably be in March of 2013 my contract would be up,” he told the Register in an exclusive interview Thursday.

 

Kinzel will serve as chairman of the new board of directors assembled by an affiliate of Apollo Global Management, if the deal worked out with the investment firm gets final approval. Apollo has agreed Cedar Fair’s headquarters will remain in Sandusky.

 

“We’re just a small spoke in their big wheel,” Kinzel said. “This is my home, and this is the home of Cedar Fair.”

 

On Wednesday, Cedar Fair, the parent company of Cedar Point, announced it reached an agreement with Apollo. The New York company owns many other companies, including AMC Entertainment, Harrah’s and Norwegian Cruise Lines.

 

Cedar Fair unitholders will be paid $11.50 for each unit. The deal is valued at about $2.4 billion, including the refinancing of about $1.6 billion in debt. It’s expected to be finalized by spring 2010.

 

The agreement in place gives Cedar Fair 40 days during which it may consider proposals from other companies.

 

By Thursday afternoon, the first batch of documents on the agreement were posted on the Securities and Exchange Commission’s Web site.

 

Kinzel said there would be no major cuts or staffing changes because Cedar Fair already chopped its payroll and expenses to cope with the downturn in the economy.

 

Employee benefits won’t change either, he said.

 

Apollo will advise on financial matters but will leave daily operations in the hands of Kinzel and his current executive team.

 

The company said the merger hinges on acceptance by holders of two-thirds of Cedar Fair’s outstanding units, regulatory approval and other conditions. Kinzel said unitholders will get a letter before the vote detailing specifics of the proposed transaction before the vote.

 

Kinzel and Peter Crage, Cedar Fair’s corporate vice president of finance and chief financial officer, both said they believe people who own Cedar Fair’s units will support the agreement once they learn more about it.

 

Cedar Fair was in talks with Apollo “for some time.”

 

“Apollo approached us,” Kinzel said. “We did not approach them.”

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