BoddaH1994 Posted April 12 Share Posted April 12 https://www.businesswire.com/news/home/20240410882251/en/Cedar-Fair-Announces-Conditional-Full-Redemption-of-All-Outstanding-5.500-Notes-Due-May-2025 This article does not list out reasons and there’s no way to know what happens behind closed doors, but revolving this a year early implies to me that CF may be bearish about the economy as a whole in the short term and fears rates might be higher than they are now. This also may have something administrative to do with the merger, as they may not have a lot of cash on hand when it goes through. Quote Link to comment Share on other sites More sharing options...
Orion-XL200 Posted April 12 Share Posted April 12 Okay, explain it to me like I'm 5. 1 Quote Link to comment Share on other sites More sharing options...
BoddaH1994 Posted April 13 Author Share Posted April 13 Cedar Fair borrowed money. Unlike a loan like you or I would get, a corporate raises large amounts of capital by selling bonds. When someone buys a bond they will receive their initial investment plus interest. This interest rate is dictated by the rate that The Fed sets. So the company is responsible for replaying the initial investment plus the interest (probably defined as "debt servicing" on the conference calls.) Some bonds are "callable." This means that, although the bond matures on a certain date, the company can choose to repay it early. This is a bit of a financial risk to the bond purchaser because they may not receive the anticipated interest amount, so the interest rate is a few basis points higher for these bonds. Cedar Fair's bond matures in May of 2025, but they chose to call the bonds now. For long term debt, you simply pay off one bond by selling another. Problem is, the rates are WAY higher now due to soaring inflation and a hawkish Fed. So the cost of servicing the debt will be a very heavy burden on their balance sheet. I'm just speculating, but I see a few possibilities for why the debt would be called: 1. They believe they can revolve (buy another bond) at a lower interest rate (unlikely) 2. They believe interest rates may be even higher in 2025 3. They are concerned about being able to secure financing in 2025 (probably post merger) If they didn't have this note coming to maturity and/or the rates were lower, the merger would never have been on the table in the first place. Quote Link to comment Share on other sites More sharing options...
DiamondbackFan Posted April 13 Share Posted April 13 4. The 2025 notes are secured notes (the parks are collateral for the loan). Cedar Fair might see an opportunity to replace these notes with new unsecured notes (the parks are not collateral for the loan). Cedar Fair's 2027, 2028, and 2029 notes are unsecured. Quote Link to comment Share on other sites More sharing options...
BoddaH1994 Posted April 13 Author Share Posted April 13 3 hours ago, DiamondbackFan said: 4. The 2025 notes are secured notes (the parks are collateral for the loan). Cedar Fair might see an opportunity to replace these notes with new unsecured notes (the parks are not collateral for the loan). Cedar Fair's 2027, 2028, and 2029 notes are unsecured. I thought about that too, but do you think they have the capacity to revolve this into an unsecured loan? If so, what are your thoughts on the inherent increased rate? Rate will be higher, plus a premium for unsecured. I suppose we’ll find out the truth soon enough, but if you’re right then it leaves a lot of lingering questions. Quote Link to comment Share on other sites More sharing options...
Orion-XL200 Posted April 13 Share Posted April 13 Thanks @BoddaH1994 for the explanation! Quote Link to comment Share on other sites More sharing options...
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