Cedar Fair: Financial roller coaster looks better in 2010

From the Sandusky Register


Cedar Fair is still carrying a big load of debt on its back, and the deal with Apollo Global Management that was supposed to remove that weight collapsed in April.

But Cedar Fair executives, who find themselves still running a publicly traded company, say they are moving quickly to fix the problem.

Cedar Fair hopes to announce a method for dealing with the company’s debt when it hosts its annual meeting at 9 a.m. June 7 at the Sandusky State Theatre, two top company executives say.

Dealing the company’s approximately $1.6 billion in debt has been the top priority ever since a deal for Apollo Global Management to acquire Cedar Fair fell through, said Dick Kinzel, Cedar Fair’s chairman, chief executive officer and president, and Peter Crage, Cedar Fair’s corporate vice president, finance, and chief financial officer.

Discussions on how to fix that are moving quickly, they said.

The next major task after dealing with the debt will be to figure out a succession plan for Kinzel, 69, whose current contract with the company expires in January 2012, Kinzel said.

“You can’t hide the clock,” he said.

Cedar Fair executives are hoping for a turnaround year in 2010 at Cedar Point and the company’s other amusement parks. Cedar Fair has invested in new rides at its parks, but the season also will depend on factors that are out of the company’s control, such as the weather and the recovery of the economy, Kinzel said.

During an interview at his offices that lasted about 40 minutes, Kinzel discussed several other points. Among them:

* At the end of 2011, if Cedar Fair knows it had a good season, the board will consider resuming cash distributions in 2011.

“It will be a very, very modest distribution,” Kinzel said.

The goal is to make a small distribution to at least help unitholders with their tax liabilities next year, he said.

Q Funding, the company’s largest investor, last week urged that cash distributions resume immediately.

* Cedar Fair is no longer attempting to sell the Worlds of Fun park in Kansas City, Mo., and Valleyfair park in Shakopee, Minn.

“The only reason we put those up for sale was to try to save the distribution,” Kinzel explained.

The future of the Great America park in Santa Clara, Calif., is less certain.

Local officials are trying to put in a new football stadium next to the park for the San Francisco 49ers. Cedar Fair filed a lawsuit against the city and the 49ers last month, saying that the project violates California’s environmental regulations.

* Kinzel said Cedar Fair will continue to maintain Cedar Point’s status as the amusement park with the most roller coasters and rides in the world.

“This is the crown jewel, Cedar Point,” he said. “Capital will continue to go into Cedar Point.”

* Despite speculation that Cedar Fair might merge with the bankrupt Six Flags amusement park chain, Kinzel says he and his board have never had any discussions with the management of Six Flags about merging with the rival company.

Six Flags bondholders interested in buying the company came to Cedar Fair to ask questions about the amusement park business. Testimony in Six Flags’ bankruptcy hearings revealed that meeting and sparked all of the merger speculation, Kinzel said.

The debt problem, which forced Cedar Fair to suspend cash distributions last year, was supposed to be fixed when Apollo Global Management bought the company and took it private. Unitholders resisted the deal, which was terminated on April 6.

Some of the possible new options for dealing with the debt include amending the company’s current bank agreement, negotiating a brand new agreement with the banks, issuing more units in the stock market, selling assets or doing a bond offering, Kinzel and Crage said.

Cedar Fair has hired J.P. Morgan to weigh its options for dealing with its debt. Opportunities to deal with the debt are much better than last year, Crage said.

“The markets really have shifted since last year,” Crage said.

Kinzel said he did not know if he will retire in 2012. That’s up to the board, he said.

He said it’s possible he could stay on the board after that.

“No decisions have been made,” he emphasized.

“Succession planning is very, very important to this board and very important to me,” he said.

Kinzel said he believes the proposed merger with Apollo failed largely because of the emotional attachment investors have to Cedar Point. Many of the unitholders are small investors who live in the Sandusky area.

Kinzel said he’ll spend much of the time at the annual meeting walking unitholders through the last nine months and what motivated Cedar Fair to try to sell the company to Apollo.

Six Flags went bankrupt last year “and their investors lost everything,” Kinzel said. Cedar Fair was struggling at the same time Six Flags ran into trouble, he noted.

Crage said it was very unlikely that Cedar Fair would have gone bankrupt, too, although in 2009 “there was a possibility we could go into default,” he said. If that had happened, the banks would have renegotiated Cedar Fair’s credit terms, likely imposing higher interest costs, Crage said.

With the end of distributions, once the company got the offer from Apollo and negotiated the best deal it could, Cedar Fair had a responsibility to let the unitholders decide, Kinzel said.

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