S&P Downgrades Cedar Fair to Stable from Positive

[The Interpreter]

S&P Revises Its Outlook for Cedar Fair

NEW YORK (AP) - Standard & Poor's Ratings Services revised its outlook on amusement park operator Cedar Fair LP to "stable" from "positive."

A "stable" outlook means ratings are not likely to be changed in the short term.

The ratings agency also affirmed Cedar Fair's ratings, including its "B+" corporate credit rating.

"The outlook revision is based on relatively flat operating performance in the key September quarter and the persistence of heightened debt leverage," credit analyst Hal F. Diamond said in a statement.

The heightened debt leverage is related to its Paramount Parks acquisition and its large distribution payout history as a result of its master limited partnership structure, S&P said.

The Sandusky, Ohio, company had $1.75 billion in debt at Sept. 24.

Shares of Cedar Fair slipped 6 cents to $27.81 in midday trading on the New York Stock Exchange.

http://news.moneycentral.msn.com/provider/...&ID=6250281

[TheKlockster]

Positive is better than stable right? That sounds like great news. Also they're only 1.75 billion in debt - which I think is pretty good considering they took out a 2 billion dollar loan. Looks like things might work out after all.

[The Interpreter]

Uh...it is a DOWNgrade. It WAS positive...NOW it is stable.

[CoastersRZ]

Yes, it was at positive, and then it was moved to stable. The price of the stock has been hovering slightly under $28 for a couple weeks now.

[TheKlockster]

Well stable isn't too bad is it? They've payed off some of their debt - so they're at least doing better than Six Flags.

[RailRider]

During most mergers or acquisitions whichever company assumes the debt load usually sees their rating downgraded. For example when the company I worked for was merged with another company, the company doing the buying to a ratings hit. We were downgraded for a year and then have moved up and with the increased size and reach have become extremely profitable and are stock is doing quite well. Expect the same thing for Cedar Fair, 1 to 2 years of being stable while they work out the bugs of their new parks and orginazational structure and then look for the company to do very well afterwards. Also look for improvements and ride additions to continue to be made because they have shown they can pay off their debt and a B+ rating is very good, especially for a non Financial Services, Insurance, or Health company.

Expect good things and stop panicing that this will end up like Six Flags.

[jzarley]

Standard & Poor's defines 11 credit ratings, ranging from AAA (the best) to D (the worst). As a B+, CF falls in the higher end of the seventh (of 11) rated category. Here's how S&P defines a "B" rating:

"An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation."

And, the added plus means:

"The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories."

Meaning, S&P doesn't believe that CF's long term success is an absolute certainty, but seems to think in the long run that they'll pull it off and meet its obligations. This rating is concerned only with the quality of their debt--it makes no correlation to stock price or profitability, although in real life all usually go hand-in-hand.

As of the end of September Six Flags had an S&P rating of B- (and was on Credit Watch). But not as different from CF's rating as you might think. (Before I looked it up, I would have guessed them to be in the "C" range...)