Sharp Rise In Number Of Companies With Distressed Debt

[The Interpreter]

Includes mention and discussion of Six Flags:

http://www.nysun.com/article/61612?page_no=1

[Guest kwindshawne]

Here in dayton, the job market is the worst I have ever seen-very slim pickings. The financial problems are very obvious in the way the area looks.

[jzarley]

Yeah, it's good to remember that regardless of how critical we've all been over CF's recent financial performance (and, I include myself in that list) it's important to remember that they're still cash flow positive (for now anyway ) even with the nearly $2B debt. Six Flags has been running with a loss for the last several years.

I really hope that SF can pull it out...I really do think that Shapiro is on the right track, and have a lot of respect for what he is trying to do.

Duane Reade (a pharmacy chain in NYC) doesn't surprise me...they have a ridiculous number of locations! You can stand on some corners in Manhattan and see four or five Duane Reade stores from where you're standing. The only thing you find more often in NYC than a Starbucks is a Duane Reade!

[The Interpreter]

It should, however, be pointed out that Cedar Fair's dividend payout is now exceeding its earnings. . .and that they borrowed enough money when they made the Paramount Parks acquisition to keep making distributions as in the past.

[hauntguy]

Is anyone even for sure that CF is still $2B in debt? Does anyone know how much has already been paid-off? I seriously doubt this debt load is still the same since the Paramount purchase! -Hauntguy

[jzarley]

In CF's most recent 10Q filing with the SEC (08/03/07) they list outstanding debt at $1.86B, as opposed to the $1.76B amount they indicated on 12/31/06. So, it doesn't appear the debt amount is going down at this point:

http://yahoo.brand.edgar-online.com/fetchF...1&Type=HTML

In posts (both here and on financial boards), CF's has usually been referred to as having "nearly $2B in debt", I don't think they ever actually hit the $2B number. If I recall correctly, they financed $1.75B at the time of the Paramount acquisition to cover the acquisiton cost, and to refinance existing company debt, so their debt amount appears to be higher now than it was immediately after the Paramount acquisition.

It was originally planned that CF would issue additional shares of stock to pay down the down the debt by at least $250M. That was supposed to occur late last year, but the offering never occurred. The popular consensus is that the investor interest just wasn't there (the offering price was estimated to be around $25/unit), which isn't a real good sign.

As Interp pointed out, they actually borrowed money to continue to pay dividends. Which, in strict financial terms, sort of defeats the definition of a "dividend." (But, as a unit holder, I won't complain about that just yet )

My initial point was that although things look pretty bad for CF right now (and, could potentially get a lot worse), at this point they are still in better overall financial shape than SF.

[CoastersRZ]

I believe that they reason they never had the public offering of additional units is because the unit price never rose high enough. The higher the unit price went, the less units they would have to sell in order to make the $250 million figure. And, the fewer units they have to sell means less dilution for current unit holders (having to split the pie more ways with the additional units).

[jzarley]

^ and, that's a great point...with the lack of investor interest the offering price would be so low that it would be necessary to offer more shares than they want. (I guess that's the "subject to market conditions" clause in the original press release )

An improved stock price would help a lot of things for FUN...it would make the shelf offering easier and more palatable to current unit holders, and it would increase their market cap which would bring their market value closer in line with their leveraged debt.

Of course, the stock probably isn't going to go up until the financial operations reports get better...